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North Carolina v. Southern Bell Telephone and Telegraph Co.

Filed: June 1, 1982.

STATE OF NORTH CAROLINA EX REL. UTILITIES COMMISSION AND THE PUBLIC STAFF
v.
SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY



Appeal by Southern Bell Telephone Company from the North Carolina Utilities Commission. Order entered 15 April 1981. Heard in the Court of Appeals 9 April 1982.

Wells, Judge. Judges Martin (Harry C.) and Whichard concur.

Wells

In computing their gross revenues and expenses for the purposes of this rate case, Bell excluded the investment, revenues, and expenses associated with or resulting from advertisements placed by professional and business subscribers in the classified section of Bell's various telephone directories. The classified directory has acquired the title of and is generally referred to as the yellow pages. In its order, the Commission found and concluded that these revenues should be considered for rate-making purposes. In one of their assignments of error, Bell contends that the Commission's findings and conclusions on this issue were erroneous in that (1) the Commission exceeded its authority and (2) its findings on this issue were not supported by competent, material, and substantial evidence.

To put this question in clear focus, we quote in full the Commission's findings and conclusions on this issue, as follows:

Findings of Fact

9. The revenues, expenses, and net operating income of the Company's Directory Advertising Operations are properly includable in the cost of service in this proceeding.

Evidence and Conclusions for Finding of Fact No. 9

The evidence for this finding is contained in the testimony of Company witnesses Turner and Thomas and Public Staff Witness Daniel.

Company witness Turner eliminated $6,894,000 of net operating income applicable to directory advertising operations from his determination of net operating income for rate-making purposes. He stated that he had made this adjustment on the recommendation of Company witness Thomas.

Company witness Thomas stated this adjustment is appropriate in view of the present competitive environment. He stated that at the federal level there is the clear intent that we eliminate, insofar as possible, cross-subsidies among services.

Public Staff witness Daniel testified that the elimination of directory advertising is both inequitable and unjustified. To separate the operations of directory advertising from utility operations permits the Company to realize revenue directly related to the operations of a public utility but which will not be considered in establishing rates. Witness Daniel did not reflect the impact of the adjustment to directory advertising proposed by Company witness Turner in developing the test year cost of service.

The Commission recognizes that there is a movement toward the separation of ancillary services from the regulated area in the telephone industry. It also recognizes that competitive pressures may eventually be a factor in the marketing of directory advertising by Southern Bell in its North Carolina operations; however, ...


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