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Office of the People's Counsel v. Public Service Commission of the District Columbia

May 02, 2002


Petition for Review of a Decision of the Public Service Commission of the District of Columbia (PSC Docket No. TT00-4)

Before Steadman, Reid and Glickman, Associate Judges.

The opinion of the court was delivered by: Glickman, Associate Judge

Argued January 10, 2002

In this appeal, the Office of the People's Counsel asks us to vacate a Public Service Commission order approving a tariff amendment sought by Verizon Washington, DC Inc. The amendment would expand the category of home-based business customers of Verizon who are eligible for telephone service at favorable residential rates. The Office of the People's Counsel contends that the amendment unjustly discriminates against Verizon's other business customers and argues that the Commission's approval is fatally flawed on the ground that it is not supported by substantial evidence in the record. We conclude that the decision on appeal withstands the main challenge that is levied against it, but we nonetheless vacate the Commission's order and remand the case for further consideration because the Commission based its decision in part on a misunderstanding of the record before it.


Verizon Washington, DC Inc. provides telephone service in the District of Columbia pursuant to a tariff approved by the Public Service Commission. Under that tariff, customer service may be furnished at either business or residence rates. Rates for residential customers are typically lower than rates for business customers, but business customers may choose from amongst a wider variety of service options. Only business customers may be listed in the business section of the White Pages telephone directory prepared by Verizon. According to the tariff, "[t]he determination as to whether customer service is furnished at business or residence rates is based on the location and character of use made of the service," with the proviso that "[t]he type of directory listing may, in some cases, also serve as a satisfactory basis for determining whether business or residence rates apply." More specifically, the tariff states that business rates apply "where the use is primarily or substantially of a business, professional, institutional or occupational nature, or where a business directory listing is furnished." In contrast, the tariff provision that specifies when residence rates apply states that "[s]ervice is classified and charged for as residence service where the primary use of the service is of a domestic nature, and where the business use, if any, is merely incidental." *fn1 (Emphasis added.)

In March 2000, Verizon asked the Public Service Commission to approve a tariff amendment deleting the italicized language from the residence service provision. Verizon stated that this amendment would "allow greater flexibility for residential customers who wish to use their service for a home-based business." The proposed change would permit Verizon to furnish telephone service to such customers at residence rates so long as their "primary use" of the service is of a "domestic nature," even if their business use of the service is more than "merely incidental." In other words, substantial use of a home telephone for business purposes would be deemed compatible with the residence service classification so long as the business use did not predominate. Theoretically, at least, home-based businesses would be able to save money by opting to pay for telephone service at residence rather than business rates. The rates charged to other users of telephone service would not be affected by the amendment (at least not directly or immediately).

The Public Service Commission issued a public notice inviting written comments on Verizon's proposed tariff amendment prior to "final rulemaking action." The Office of the People's Counsel (OPC) submitted the only comments. OPC urged the Commission to reject the tariff amendment as unjustly discriminatory because it would allow home-based businesses to be charged a lower rate for telephone service than non-home-based businesses. *fn2

In reply, Verizon explained that District customers who operate small businesses from their homes would be the main beneficiaries of the proposed tariff amendment. Voicing its concededly undocumented belief that most such customers already had residential telecommunications service anyway, Verizon stated that such customers "would be able to more accurately report" their telephone usage, and Verizon, in turn, would be better able to meet their service needs. Verizon argued that "only the smallest businesses would qualify" for residential rates even if the Commission were to approve its proposed amendment because such rates would continue to be available only when the primary use of the service is of a domestic nature. Verizon argued that for this reason eligible home-based businesses were not similarly situated with other businesses, and hence the proposed amendment would not be discriminatory.

In addition to submitting its written comments, OPC served a "data request" on Verizon in the form of seven interrogatories concerning the purpose and impact of the proposed tariff amendment. Among other things, OPC asked Verizon how many home-based businesses currently were classified as business customers and how much business service revenue those customers generated; whether the call volume attributable to home-based businesses differed from that of other businesses; and how Verizon's revenues would be affected if home-based businesses were to take advantage of the tariff amendment and switch to a residential rate.

Responding to OPC's interrogatories, Verizon acknowledged that it did not know how many home-based business customers subscribed to business service or what revenues and call volume they generated. Nor could Verizon estimate how many requests for reclassification of service it might receive if the Commission were to approve its tariff amendment. *fn3 Verizon proceeded on the admittedly unverified but, it suggested, not unreasonable assumptions that most home-based businesses are "very small, both in terms of revenue and call volumes," and that customers who would choose residential telephone service to meet the needs of a home-based business would display calling patterns comparable to those of other residential customers. *fn4 In support of its claim that customers with significant business call volume would not switch to residence service if the tariff change were approved, Verizon pointed out that such customers would continue to have to purchase business service in order to be listed in the business section of the White Pages.

After considering OPC's comments, Verizon's reply, and Verizon's interrogatory responses, the Public Service Commission issued an order and a notice of final rulemaking in which it granted Verizon's application to amend its tariff. The Commission rejected OPC's argument that charging home-based businesses lower rates for telephone service would discriminate unjustly against non-home-based businesses on the grounds that "a home-based business customer would only be able to receive residential rates when the use of the service is primarily domestic in nature and the location of the service is at a residence, while a business service is primarily business or professional in nature."

OPC asked the Commission to reconsider, arguing that the distinction between home-based businesses and non-home-based businesses was not supported by substantial evidence in the record. OPC emphasized that Verizon presented the Commission with no hard data - only unverified assumptions - concerning the volume of telephone calls or the revenues that home-based businesses generate compared to other businesses. Given the absence of such data, OPC also argued that the record did not support the Commission's conclusion that the primary use of telephone service furnished to home-based business customers at residential rates under the tariff change would remain domestic in nature. In effect, OPC contended, "the Commission simply stated a conclusion (that there is a distinction between home-based businesses and non-home-based businesses) without explaining how it reached that decision, other than to cite its reliance upon Verizon's tariff."

Unpersuaded, the Commission reaffirmed its approval of Verizon's tariff amendment. The Commission explained that it was not deterred by the absence of call volume data in the record before it. The Commission was prepared to "agree with OPC that monitoring a residential customer's calling patterns could render a more conclusive determination that the primary use of a particular residential line is either domestic or business ...

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