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AGO 1956 No. 223 - March 15, 1956
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Don Eastvold | 1953-1956 | Attorney General of Washington

TELEPHONE COMPANIES ‑- EXCHANGE AREA MAPS ‑- RIGHTS EXISTING THEREUNDER.

The right arising from the filing and acceptance of an exchange area map imposes on the company, not only the right, but the obligation to serve the area embraced therein.   In the situation at Richland, that right has been transferred to successor companies, and persists as an exclusive right until modified by appropriate administrative action.  Justification for dual exchange area maps must be determined by the Commission on the evidence in each case.  Disposition of physical telephone plant by the Federal Government cannot extinguish rights arising under an exchange area map pursuant to state law under the facts pertaining to the Richland situation.

                                                                   - - - - - - - - - - - - -

                                                                  March 15, 1956

Honorable Ralph Davis, Chairman
Washington Public Service Commission
Insurance Building
Olympia, Washington                                                                                                              Cite as:  AGO 55-57 No. 223

 Dear Sir:

             Your requests, as consolidated in your letter of February 16, 1956, for an opinion of this office on certain matters relating to the rendition of telephone service in the Richland area have been considered.  The questions submitted by you are as follows:

             1.         Does the filing of a telephone exchange area map and the publication of a commission order, recognizing a particular telephone company's operation within that area, vest in said company an exclusive right to operate in that area?  If so, is such right transferred to a successor company when the operating plant of the original company is sold and such sale is approved by the Public Service Commission?

             [[Orig. Op. Page 2]]

            2.         Is a territorial right (recognition by the Public Service Commission) a piece of property that can be sold separate from the physical plant?

            3.         Can the owner of a telephone system and holder of Public Service Commission's granted territorial right, sell the system to the United States Government and, thereafter, validly sell the territorial right to another company; and further can the purchaser of the territorial right claim exclusive right to operate, and thereby force the United States Government to sell the system to said purchaser, without the United States Government being permitted to consider other or higher bids?

             4.         Can more than one company be certified by the Public Service Commission as being able and willing to serve the Richland area?

             Our conclusions are as follows:

             1. The right arising from the filing and acceptance of an exchange area map and entry of an order referred to imposes on the company not only the right but the obligation to serve the area embraced therein and, in the instant case, such right is transferred to the successor company under the facts of the case.  To the extent such right may not be a vested right, it necessarily persists as an exclusive right until such time as modified by appropriate administrative action.

             2. Under the somewhat unique facts of the instant situation the successor company is possessed of the territorial right referred to by virtue of commission acceptance of tariff documents effectuating transfer of such right.

             3. The manner of dispostion by the federal government of the telephone system now owned by it in the area in question is covered by the provisions of federal law pursuant to which the system is to be sold.  The manner of disposition cannot, however, be determinative of territorial rights and obligations arising under state law.

             4. While the prescription of dual territorial boundaries would be contrary to established commission policy it may not be illegal as a general proposition.  The justification therefore in any particular instance would be for the commission to determine on the evidence applicable to such case.

              [[Orig. Op. Page 3]]

                                                                     ANALYSIS

             From information submitted in your letter, further supplemented by the records of the commission made available to us, certain matters are of significance in resolving your inquiries and should be pointed out.

             It appears that in 1943 representatives of the federal government requested the state regulatory body to authorize a temporary interruption of telephone service by private agencies in the Richland area.  The requested action was deemed necessary because of the federal activities to be conducted in that area in connection with the Hanford Engineer Works.  In due time the predecessor of the commission, accordingly, entered its order November 27, 1943, in Cause No. FH-7714, entitled "In the Matter of Temporary Interruption of Service Responsibilities, Obligations and Territorial Rights of Certain Telephone Copanies whose Exchange Area Boundaries are Overlapped by, or are Contiguous to or Adjacent to Hanford Engineer Works."  Said order was so phrased as to accomplish the purpose stated in its title.  More specifically pertinent to the instant inquiry the order provided:

             "Said companies must be relieved of any responsibility for rendering telephone service or any obligation to render such service, in that portion of their filed exchange areas that now, or hereafter, may be overlapped by or be in conflict with the boundaries of the project known as the Hanford Engineer Works.  However, at the expiration of the period of operation of the communications system in the project area by the Federal Government, the obligation, responsibility and rights to serve all of their respective exchange areas will again automatically apply according to the tariffs of the several telephone companies now on file with the Department of Public Service."  (Emphasis supplied)

             The Richland area in question became a federal reservation.  In its acquisition of telephone facilities the government specifically excluded from purchase or condemnation franchises and territorial rights.

             One of the companies involved was the Kennewick Valley Telephone Co.  Subsequent thereto, such company was purchased by the Interstate Telephone Co., predecessor of the General Telephone Co. of the Northwest.  The purchase was approved  [[Orig. Op. Page 4]] by the commission by its order in Cause No. U-8175.

             Starting in 1911, the Richland area was recognized in tariff filings with the state as within the serving area of the Kennewick Valley Telephone Co.  The existence of an exchange area map covering the Richland area as a part of its tariff filing is first noted in 1928; it appears as Sheet No. 25-B of W. D. P. W. No. 6 of the Kennewick Valley Telephone Co.  Successive revisions of said Sheet No. 25-B continued to include the Richland area as within the exchange area of said company.  Sheet No. 25-B was never revised by the commission as a result of federal acquisition of the telephone properties in the area.

             In 1948, pursuant to order of the commission in the aforesaid Cause No. U-8175, Interstate Telephone Company purchased the utility assets of the Kennewick Valley Telephone Co.  Thereafter the former company filed with the commission its adoption notice whereby it adopted the filed tariffs of the latter company, including Sheet No. 25-B.  An examination of the commission's files discloses that the exchange area map for Richland has continued as part of Interstate's filed tariffs and that, at this date, it continues as a part of the filed tariffs of the General Telephone Co. of the Northwest, General being the present corporate name of what was previously Interstate.

             We have set forth at some length the tariff history of the Richland area exchange map.  Such history demonstrates the commission has accorded to the exchange area map in its tariff activity the intent which was expressed in the previously quoted portion of the order in Cause No. FH-7714.  We also observe such history shows that for many years prior to 1941 exchange area maps were utilized by the commission to define telephone service areas.

             Since 1943 the telephone system in the Richland area has been operated as a part of the federal activities being carried on there.  Certain limited telephone operations, such as public pay stations and hotel telephone facilities, have, however, been supplied by the successive companies heretofore enumerated in the history of the Richland area exchange map.

             Public Law No. 221 of the 84th Congress now provides for disposition of the telephone system at Richland by the federal government.  Such disposition has not as yet been made.  We assume it is because of an interest by various entities to acquire such system that the instant opinion has been requested.

              [[Orig. Op. Page 5]]

            It will be recognized that the facts giving rise to your inquiry are unique in that to our knowledge they have no counterpart in any reported judicial decision.  Before considering the influence of the factual situation on the general problem it is advisable that reference be made to our applicable state law and decisions of the commission based thereon.

            Of direct significance are the provisions of RCW 80.36.230 and 80.36.240 which read, respectively:

             "The commission may prescribe exchange area boundaries or territorial boundaries, or both, for telephone companies"

             and

            "The commission in conducting hearings, promulgating rules, and otherwise proceeding to make effective the provisions of RCW 80.36.230 shall be governed by, and shall have the powers provided in, chapter 80.04 [[chapter 80.04 RCW]]of this title.  All provisions as to review of the commission's orders and appeals to the supreme court contained in said chapter shall be available to all parties affected by the commission's orders."

             The foregoing statutes were enacted at the 1941 session of our state legislature.  The act in question gave recognition to and directly authorized what the commission and its predecessors had been doing for years.  As an integral part of its telephone tariff activities both before and after 1941 the commission has, in effect, prescribed exchange area or territorial boundaries through its requirement that each telephone company have on file with the commission a map setting forth the boundaries of the area or areas in which such company is offering telephone service under its filed tariffs, rules and regulations.  This requirement was last set forth by an order in Cause No. FH-7778, effective February 1, 1944.  The commission may be said to have utilized its tariff functions as the means of making RCW 80.36.230 effective.

             To our knowledge in only two instances has the commission had before it for formal decision matters involving non-voluntary alterations of exchange boundaries.  In the first case,Clyde Telephone Co. vs. Prescott Telephone & Telegraph Co., the commission February 14, 1950, in Cause No. U-8296, entered an order declaring a portion of respondent's alleged exchange area  [[Orig. Op. Page 6]] open territory to be served by any one desiring to render telephone service therein.  It appears that the commission's decision was influenced by the fact that the portion of the area in question was not actually being served by respondent except through the providing of switching service to farmer lines and that there was no substantial indication that the respondent had the financial ability to serve the area.  The commission recognized the efficacy of an exchange area map and, accordingly, to make its decision effective ordered respondent to file a revised exchange area map deleting the territory declared open.

             The other case is that ofCommission v. Mashell Telephone Co., Commission Cause No. U-8723.  It appears from an analysis of the commission's order of September 10, 1954, in said cause that numerous complaints from residents in a portion of respondent's rural area had been made as to the inability or unwillingness of respondent to serve them adequately.  A specific matter of inquiry was whether a portion of respondent's exchange area, as delineated on its filed exchange area map, in a particular community should in effect be declared open for service by some other telephone company.  With reference to this situation the commission, in its order, stated:

             "The request of the complaining witnesses was that the sections in question be removed from Mashell's exchange area so that another company could serve therein.  In the absence of any evidence that Mashell's service is inadequate or that it is failing to offer modern and sufficient service the Commission is of the opinion that it hasno legal justification to permit the entrance of a second telephone company into a territory already occupied by another which is able and willing to give adequate service to the public in the territory in question.  Only when it appears that the existing utility is not rendering and performing service in a prompt, expeditious and efficient manner, and its appliances, instrumentalities and services are not modern, adequate, sufficient and efficient, or where there has been a misuse or non-use of the area resulting in a breach of public duty should an area be taken away or declared open."  (Emphasis supplied)

              [[Orig. Op. Page 7]]

            Thus, it appears that the commission has construed the effect of an exchange area map as affording to the telephone utility a right to protection from invasion by another telephone utility except

             "* * * when it appears that the existing utility is not rendering and performing service in a prompt, expeditious and efficient manner, and its appliances, instrumentalities and services are not modern, adequate, sufficient and efficient, or where there has been a misuse or non-use of the area resulting in a breach of public duty * * *."

             While there are no decisions of our supreme court on the matter we are in complete accord with the construction the commission itself has enunciated as to the effect of an existing exchange area map.  Such construction, in our opinion, comports not only with sound administrative procedure but also with the intent of RCW 80.36.230.

             The case of Northern Ohio Telephone Company v. Putnam, 640 Ohio St. 238, 130 N.E. (2d) 91, decided by the supreme court of Ohio November 2, 1955, is of interest.  This case affirms the general principles hereinbefore set forth in the Mashell matter, supra, as to which we have noted our concurrence.  In thePutnam case a controversy arose between two telephone companies concerning the respective rights of each to serve a particular area.  Even in the absence of a statute similar to RCW 80.36.230, the court stated:

             "Although there is no statute that specifically gives the Public Utilities Commission authority to determine a boundary between the service areas of adjoining telephone companies, its power to do so would appear unquestioned both in reason and in law."

             It was pointed out therein that the Ohio supreme court had previously adjudicated the authority of the regulatory body of that state to determine which of two adjoining telephone companies must give service in an area where only one desires to do so.  It was also stated that the commission had the power to determine which of two companies must give service in an area where both desire to so do.  In that case the commission had previously determined that the area in dispute was in the operating area of one of the companies, as evidenced by its exchange boundary map approved by the commission, and that said  [[Orig. Op. Page 8]] company had the right and duty to serve such area.  In the absence of evidence upon which the court could say that such a determination by the commission was unreasonable or contrary to law, that determination fixed the rights and obligations of the competing companies.  The result was that the company having the exchange area map for the area prevailed.

             From all of the foregoing we must conclude that, except for whatever effect intervening federal operation of the Richland system may be said to have, General Telephone Co. of the Northwest stands possessed of the same rights in the Richland area upon termination of such federal operation as the commission found the Mashell Telephone Co. to have in theMashell case, supra.  Specific consideration must be given, then, to the effect of such intervening federal operation.

             It has heretofore been noted that the order in Cause No. FH-7714 was issued pursuant to the request of federal representatives; federal acquisition of telephone facilities in the area expressly excluded franchises and territorial rights; the state regulatory body has consistently recognized, in its tariff treatment, the expressly stated provisions of such order as constituting a "temporary interruption of service responsibilities, obligations and territorial rights" during the period of federal operation of the system; in accordance with such expressly stated provisions the commission has treated the Richland exchange area map as an integral part of the tariffs of the Kennewick Valley Telephone Co. and its successors.  Further, no other company has on file with the commission an exchange area map for the area in question.

             From a consideration of all these factors we are convinced that the successor in interest to the Kennewick Valley Telephone Co. will, as a matter of law, upon termination of federal operation of the Richland telephone system, be possessed of the same "territorial rights" as were temporarily interrupted within the contemplation of the aforesaid order of 1943.  To advise otherwise would be to treat the 1943 order as a nullity.

             We must comment that the 1943 order is, undoubtedly, most unusual, if not unique.  This characterization of the order is in no sense a criticism.  Rather such characterization merely recognizes an unusual if not unique problem that had to be met.  For some reason, the federal government was express in its desire to exclude acquisition of franchises or territorial rights.  It was apparent from its request of the state regulatory agency that its operation of the  [[Orig. Op. Page 9]] telephone system was to be of a temporary nature.  It cannot be said to have been imprudent or improper, under such circumstances, for the state body to have entered the order in question and to have effectuated the intent of such order through its tariff treatment of the exchange area map.

             This being so, the territorial right in question is determined by the terms of that order and continues until such order is modified by appropriate commission action.  It is not within our province to advise whether such modification could be justified.  We believe the commission has ably set forth the required general test in the Mashell order, supra.  In the instant matter the same general criteria would apply.  Whether such criteria are met would be determined from evidence relating to the ability and willingness to render adequate service upon termination of federal telephone operations in the area.  Until such a determination is made, supported by appropriate evidence, the successor to the Kennewick Valley Telephone Co. is the only existing telephone company now authorized to render telephone service in the Richland area within the confines of the exchange area map relating thereto.

             Whether consideration may be given to the acceptance of an exchange area map filed by another company, thus constituting dual authority in the same area, would appear to be governed by the same criteria referred to in the preceding paragraph.  We understand such would be contrary to fixed commission policy.  Apparently this policy has been developed as a result of practical engineering and economic factors peculiarly within your knowledge.  We are of the view, however, that where one telephone utility already possesses exchange area rights no lesser justification would be required to authorize dual rights than would be required to declare such exchange area open.

             We are not unaware of the fact the physical telephone plant serving Richland is now many times the proportions it was in 1943.  We cannot be properly concerned here, however, with this matter of growth or its causes.  We note, however, growth of telephone plant in varying degrees has been a common experience throughout the state during this same period.  The legal matter here involved concerns not a matter of rights to any particular telephone plant but rather rights to serve an area under the conditions heretofore discussed.

             We have not overlooked possible considerations of the federal government in the disposition of the physical property.  We only hold in that regard that since General Telephone Co. of the Northwest is the company possessing the territorial  [[Orig. Op. Page 10]] rights under state law, which were expressly reserved to its predecessor by the 1943 order, the existence of such rights which arise under state law cannot be extinguished by the manner of disposition by the federal government of the physical property.

 Very truly yours,
DON EASTVOLD
Attorney General 

FRANK P. HAYES
Assistant Attorney General

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