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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 1

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 2

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,

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