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On August 14, 2014, the Commission held its regularly-scheduled meeting.  Several telecommunications items were addressed on the regular agenda, including the issuance of a $19.7 million dollar fine on Telseven, Calling 10, and their owner for cramming.  On the consent agenda, the Commission extended the general rate case stay and waterfall freeze for CHCF-A recipient companies until December 31, 2014 and April 1, 2014, respectively.  The Commission also approved the Resolution resolving the outstanding rehearing issue in Calaveras’s 2009 General Rate Case and separately authorized an increase in the CTF surcharge to 0.93% effective October 1, 2014.  In addition, the Commission placed another hold on the Proposed Decision addressing DIVCA franchise renewals.  These and other items of interest are discussed in further detail below.    
 
REGULAR AGENDA
 
Decision Imposing $19.7 Million Fine on Telseven, Calling 10, and Patrick Hines(Items 67 and 67a, Item 67a approved 5-0) – This item approves the “Decision Different” to a Modified Presiding Officer’s Decision (“POD”).  Both the “Decision Different” and the Modified POD address a POD that was issued in December 2013.  The POD had found that Telseven LLC (“Telseven”), Calling 10 LLC dba California Calling 10 (“Calling 10”), and Patrick Hines (owner and CEO), were responsible for unauthorized charges to California consumers and issued a $19,760,000 fine for the violations. 
 
This “Decision Different” is consistent with the initial POD.  Specifically the “Decision Different” also imposes $19,760,000 fine, jointly and severally, against Telseven, Calling 10, and Patrick Hines, as an individual.  The $19,760,000 fine will be divided equally between the corporate respondents and Mr. Hines.  The “Decision Different” concludes that Mr. Hines failed in his appeal to identify any business associate, partner, or shareholder who may have been responsible for Telseven and Calling 10’s unauthorized charges or schemes.  The “Decision Different” accordingly concludes that Mr. Hines is the alter ego of Telseven and Calling 10 for the purposes of this proceeding, and therefore it is appropriate to assess the fine against Mr. Hines as an individual. 
 
The “Decision Different” is an alternate to a Modified POD issued to address an appeal of the POD filed by Mr. Hines.  The Modified POD differed from the POD in that it only found Telseven and Calling 10 liable, but not Mr. Hines as an individual. 
 
A copy of the Proposed Officer’s Decision is available at the following link
 
A copy of the Modified Proposed Officer’s Decision is available at the following link:  
 
A copy of the “Decision Different” is available at the following link:   
 
Staff Authorized to File Comments with FCC Regarding the CPUC’s Review of the Comcast-Time Warner Merger (Item 74, approved 5-0 ) – This item authorizes staff to file comments with the Federal Communications Commission (“FCC”) to inform the FCC that the CPUC is reviewing the application for the proposed transfer of Time Warner Cable Inc. and affiliates (“Time Warner”) and the pro forma transfer of Bright House Networks Information Services to Comcast Corporation (“Comcast”), and that the Commission will assess the potential impact of the merger on California.  The comments will also urge the FCC to require Comcast and Time Warner to show why the claimed merger benefits — such as higher broadband speeds, more advanced video and voice services, a more secure network, better system reliability – could not be provided by Comcast and Time Warner if they remain separate entities.  The comments will further urge the FCC to require Comcast to justify its statement that the merger would not result in any public hardship given that the merger would reduce the potential for competition.  Further, the comments will ask the FCC to review Comcast’s implementation and administration of its “Internet Essentials” program and highlight certain allegations that have been raised with how Comcast has been administering the program, including allegations that Comcast makes the sign-up process long and cumbersome, that Comcast intentionally enrolls the eldest child in a household thereby intentionally limiting the applicability of the discount, and failing to inform market-rate representatives about the program.
 
This item was introduced by Kimberly Lippi, a staff attorney at the CPUC who summarized the recommendations identified above.  In addition, Ms. Lippi made an additional recommendation related to a Divestiture Application filed by Comcast and Charter Communications (“Charter”).  The Application would effectuate a series of transactions, including a swap of customers and assets between Comcast and Charter which should result in a net divestiture of video subscribers from Comcast to Charter.  She explained that the applicants have asked that these applications all be treated together at the FCC, and that a similar application was filed with the CPUC.  Accordingly, the comments will also inform the FCC that the CPUC is also reviewing the Divestiture Application and that the CPUC will provide any data collected by the CPUC that is necessary or relevant to the FCC’s review. 
 
Commissioner Peterman, the assigned Commissioner in the Comcast-Time Warner proceeding noted that a scoping memo was released on August 14, 2014, which would provide a better sense of how the Commission is proceeding with this application.  She also explained that the scoping memo acknowledged the importance of the proposed merger and the potential impact on California.  Accordingly, she explained that the scoping memo has provided staff with direction as to a scope of issues to seek data to help inform FCC comments and data that would be helpful for resolving the issue before the CPUC.  The scoping memo also includes a schedule of the proceeding, which is aligned with the FCC’s published schedule.
 
Commissioner Sandoval requested that the comments to be filed with the FCC contain specific reference to the fact that the CPUC has a few open items that may be relevant to the potential merger, including the transfer of control of licenses under California law as enumerated by California statute.  She acknowledged that much of the public discussions surrounding this merger have been particularly focused on broadband and video, but noted that there are a lot of potential implications on voice service, which is of particular concern for the CPUC.  She also asked that the comments note that the CPUC has an open proceeding evaluating Comcast’s publication of unlisted subscribers’ personal information as an assessment of the conduct of the licensees when evaluating whether the proposed merger is in the public interest.  Lastly, she noted that the California Commission has granted Time Warner the authority to offer LifeLine, which raises additional questions.  She explained that the CPUC worked very hard to process Time Warner’s request for authority to offer LifeLine and since these entities must continue operating as vigorous competitors until the merger application is approved, that she looked forward to Time Warner continue to act as a competitor and encouraged Time Warner to swiftly act on their authority to offer LifeLine. 
 
A copy of the staff memorandum underlying this item is available at the following link
  
Greenlining and Consumer Federation of California Permitted to Late-File Notices of Intent to Claim Intervenor Compensation (Items 69 and 69a, Item 69a approved 5-0) – This item addressed Notices of Intent (“NOI”) filed by Greenlining Institute (“Greenlining”) and the Consumer Federation of California (“CFC”) for intervenor compensation in the Commission’s investigation into Comcast Phone of California, LLC (“Comcast”) for unauthorized disclosure and publication of Comcast subscribers’ unlisted contact information. 
 
Due to calendaring problems, Greenlining and CFC filed their NOI late by one and two days, respectively. Both Greenlining and CFC filed a motion to late file a NOI, which were denied by the ALJ on the basis that Section 1804(a)(1) of the Public Utilities Code mandates that NOIs be filed within 30 days after “the prehearing conference.”  The ALJ reasoned that the timeframe provided under Section 1804(a)(1) is mandatory and confers no discretion on the Commission to excuse intervenors who failed to comply with statutory requirements. 
 
The Proposed Decision affirmed the ALJ’s ruling, which would have confirmed the ALJ’s analysis that the NOIs filed by Greenlining and CFC were too late.  However, Commissioner Peterman issued an Alternate, which concludes that Section 1804(a)(1) should not be interpreted to limit the filing of NOIs to the first pre-hearing conference filed in any Commission proceeding.  The Alternate finds that the Proposed Decision’s analysis of Section 1804(a)(1) is too narrow.  Specifically, the Alternate determines that Section 1804(a)(1) should be interpreted to allow an intervenor to file a NOI for interevnor compensation after any pre-hearing conference held in a proceeding.  Therefore, since a second pre-hearing conference was held shortly after the first pre-hearing conference in the Comcast proceeding, both Greenling and CFC’s NOI were filed within the 30-days of the second pre-hearing conference and timely filed. 
 
Commissioner Peterman introduced the Alternate and explained that she issued felt that the ALJ and the Proposed Decision interpreted Section 1804(a)(1) too narrowly.  She specifically pointed to the legislative history of Section 1804(a)(1), which was modified to require that an intervenor submit a notice of intent within 30 days of “the prehearing conference,” as opposed to 30 days of “a pre hearing conference.”  She explained that this modification supports her position that an intervenor may submit a NOI after any prehearing conference held in a proceeding, and that an intervenor need not be limited to the initial prehearing conference.  Commissioner Florio supported the Alternate, and expressed support for the Alternate’s analysis of Section 1804(a)(1), which he felt was consistent with the intent and goals of the intervenor compensation program. 
  
A copy of the Proposed Decision underlying this item is available at the following link
  
A copy of the Alternate underlying this item is available at the following link
  
CONSENT AGENDA
 
Extension of California High Cost Fund A General Rate Case Schedule and Waterfall Provisions (Item 29, approved on consent) – This Decision extends the current stay of the general rate case schedules and waterfall freeze first adopted in Interim Decision (D.)13-02-005, and subsequently extended on several occasions. This Decision extends the rate case stay to December 31, 2014 and sets the waterfall freeze to lift on April 1, 2015.  The initial stay/freeze was adopted pursuant to a motion filed by the Independent Small LECs for a limited stay/freeze, with the exception of Kerman, in order to accommodate the ongoing CHCF-A proceeding and with the understanding that the Commission would refuse to adjudicate any rate cases filings. 
 
A copy of the Proposed Decision underlying this item is available at the following link
 
Resolution Addressing Rehearing Issues Related to Calaveras’s 2009 General Rate Case (Item 3, approved on consent)– This Resolution addresses, after four and a half years, a single issue identified for further evaluation by the Commission in a rehearing decision of Calaveras’s 2009 General Rate Case (“GRC”). 
 
Calaveras filed its General Rate Case (“GRC”) on December 21, 2007, with a 2009 test year.  On January 29, 2009, the Commission adopted Resolution T-17184, which authorized Calaveras to receive $2,071,163 in California High Cost Fund A (“CHCF-A”) support based on a 2009 test year.  On March 2, 2009, Calaveras filed an Application for Rehearing asserting, amongst other issues, that Resolution T-17184 did not reasonably calculate the benefits to salary ratio applied to reduce benefits expenses, that the Commission improperly eliminated compensable employee sick leave and vacation, and that the Resolution did not support the determination that ratepayer funding the Employee Profit Sharing Plan (“EPSP”) should be 10% and not 15%.  In October 29, 2009, the Commission adopted D.09-10-057, denying rehearing on all issues except for the issue regarding the funding level for EPSP (“Rehearing Decision”).  In order to address the EPSP issue, the Rehearing Decision ordered Calaveras to respond to several data requests, which Calaveras timely addressed and supported with three separate reports prepared by wage and benefits economists and specialists. 
 
Now, almost five years after the Rehearing Decision was issued, this Resolution rejects and dismisses Calaveras’s arguments and the evidence presented, and concludes that Calaveras provided no reasonable basis for its recommendation.  The Resolution specifically determines that Calaveras’s responses and evidence, including the three separate expert reports, were “non-responsive.”  Accordingly, the Resolution concludes that the information submitted by Calaveras fails to provide sufficient evidence that would support a finding that the ratepayer funding to the EPSP should be 15% rather than 10%.  
 
Comments were filed by Calaveras explaining that the Draft Resolution failed to correct the legal error identified by the Rehearing Decision by failing to provide support for a 10% contribution factor.  Calaveras’s comments further highlighted the Commission’s unreasonable delay in addressing the Rehearing Decision by allowing almost five years to elapse.
 
A copy of the Draft Resolution underlying this item is available at the following link
  
CTF Surcharge Rate Increased from 0.59% to 0.93% Effective October 1, 2014 (Item 70, approved on consent) – This Resolution approves the California Teleconnect Fund (“CTF”) surcharge rate increase from 0.59% to 0.93%, an increase of almost two times the current rate.  This makes the CTF almost as large as the LifeLine surcharge, which is currently at 1.15%.  The Resolution explains that the surcharge increase is necessary to meet budgeted program expenses for FY 2014-15 based on the budget of $107.983 million adopted in Resolution T-17414 on October 3, 2012.  In order for the program to accommodate increases in CTF expenses and to account for changes in the billing base on which the surcharge is assessed, staff anticipates a shortfall in revenues if the surcharge rate is not changed.  Increasing the surcharge to 0.93% will accommodate a FY 2014-15 budget of at least $113.602 million and a FY 2015-16 budget of at least $115.8 million. 
 
All telephone corporations and interconnected VoIP service providers must assess a CTF surcharge rate of 0.93% on revenues collected from end users for intrastate telecommunications services subject to surcharge beginning on October 1, 2014.
 
A copy of the Draft Resolution underlying this item is available at the following link
 
New Rulemaking to Consider Proposed Amendments to General Order 95 (Item 42, approved on consent) –  This Decision opens a rulemaking in response to the Rules Committee’s petition for a rulemaking to consider adopting 29 proposed amendments to General Order (“G.O.”) 95 that would improve safety, enhance reliability, increase efficiency, and correct errors in the general order.  The Rules Committee is a group known as the “G.O. 95/128 Rules Committee” whose membership includes representatives from the telecommunications companies, electric utilities, labor unions, and others.  G.O. 95 contains the Commission’s rules for the design, construction, and maintenance of overhead power lines and communications lines located outside of buildings.  This Decision grants the Petition in part as to certain proposed amendments to G.O. 95, and the Decision denies the Petition in part as to the other proposed amendments that are specifically excluded from the scope of the rulemaking.  A summary of the proposed amendments within the scope of the rulemaking are identified in Appendix B of this Decision. 
 
This Decision orders the Rules Committee to organize, chair, and notice at least one all-party meeting for parties to work collaboratively to: (1) identify areas of consensus regarding matters within the scope of the rulemaking proceeding; (2) identify disputed issues; and (3) reach an agreement on the schedule of the proceeding and the appropriate procedures for resolving disputed issues.  The all-party meeting must be completed within 50 days from the date the OIR is issued. 
 
A copy of the Proposed Decision underlying this item is available at the following link
 
Control of G3 Telecom Transferred to Telehop Communications Inc (Item 44, approved on consent) – This Decision approves a transaction by which Telehop Communications Inc. (“Telehop”) will indirectly acquire G3 Telecom USA Inc. (“G3 Telecom”).  G3 Telecom is a certificated carrier that provides Voice over Internet Protocol (“VoIP”) services and resold interexchange services in California.  Telehop is a publicly-held Canadian Corporation that provides resold long distance services and interconnected VoIP services within Canada and to international locations.  Telehop is licensed by the Canadian Radio-television and Telecommunications Commission as a Class A telecommunications carrier. 
 
Under the approved transaction, Telehop will purchase shares of G3 Telecom and its various affiliated companies for a combined sum of $4.3 million.  G3 Telecom will initially be acquired as a wholly-owned subsidiary of Telehop Agencies Inc., a subsidiary of Telehop formed specifically for purpose of consummating this transaction.  Once the transaction is fully closed and all obligations of the transaction are satisfied, Telehop Agencies will be dissolved, leaving G3 Telecom as a direct wholly-owned subsidiary of Telehop.  The transaction will not involve a transfer of G3 Telecom’s CPCN assets or customers, nor an immediate change in the direct ownership or legal structure of G3 Telecom. 
 
This Decision determines that the transaction will not be adverse to the public interest because the applicants have provided information showing that the proposed change in ultimate ownership of G3 Telecom will not be adversely impacted.  Moreover, the Decision finds that Telehop has sufficient managerial and technical experience, along with sufficient financial resources to operate G3 Telecom.
 
A copy of the Proposed Decision underlying this item is available at the following link
  
Family Resource and Referral Center Certified as San Joaquin County’s 2-1-1 Service Provider (Item 30, approved on consent) –  This Resolution grants the Family Resource and Referral Center of San Joaquin County (“FRRC”), the authority to use the 2-1-1 abbreviated dialing code to provide information and referral (“I&R”) services to all of San Joaquin County.  The Resolution concludes that FRRC will provide immediate public safety impacts during non-emergencies, emergencies and disasters by providing a web-based and call-in information call center that addresses the public safety 24 hours a day, 7 days a week.  FRRC will also work closely with the Office of Emergency Management in San Joaquin and 2-1-1 Fresno to provide critical public information related to emergency and disaster incidents. 
 
The Resolution finds that FRRC has the organization structure, background, and experience to provide basic 2-1-1 I&R services for the San Joaquin County.  FRRC is a non-profit organization established in 1979 that provides child and youth development services.  The organization operates under the fiscal sponsorship of the Stockton Metro Ministry and is governed by a Board of Directors comprised of San Joaquin County residents.  In addition, FRRC employs a service delivery system, or a call-in or walk-in location to assist individuals in navigating through child care and health and human services.  The Resolution notes that this center is structured and functions the same as a 2-1-1 I&R service center.  In addition, the Resolution also finds that FRRC is capable of meeting 2-1-1 service conditions required by all service providers, including staffing and language requirements.  Finally, the Resolution concludes that FRRC has demonstrated that it will adhere to the standards for delivery of I&R services as established by the Alliance of Information and Referral Services (AIRS). 
 
A copy of the Draft Resolution underlying this item is available at the following link
  
HELD ITEMS
 
Proposed Amendments to Franchise Renewal Provisions of DIVCA (Item 37, held by Staff until 8/28/14) – This Proposed Decision would amend General Order (“G.O.”) 169 and would adopt procedures for implementing the franchise renewal provisions of the Digital Infrastructure and Video Competition Act of 2006 (“DIVCA”).  DIVCA was enacted by the Legislature to create a new state video franchising process on the basis that “increasing competition for video and broadband services is a matter of statewide concern.”
 
The Proposed Decision explains that the procedures and criteria for renewing a state-issued video franchise are set forth in Public Utilities Code Section 5850(a)-(d), which provides that the criteria and process described in Section 5840 shall apply to a renewal registration and that the Commission shall not impose additional or different criteria.  The two exceptions under Section 5850 require the renewal process to be consistent with federal laws and regulations and provide that the Commission shall not renew a franchise if the video service provider is in violation of any final non-appealable court order.  Accordingly, the Proposed Decision would conclude that the process for renewing state-issued franchises must be identical to the original application process set forth under Section 5840, subject to the two exceptions.
 
The Proposed Decision would conclude that the process outlined in Section 5850 is consistent with the federal informal process, except that it does not provide an opportunity for notice and comment.  Accordingly, the Proposed Decision would modify G.O. 169 to include an opportunity for notice and comments for all franchise renewal requests, limited to the narrow grounds under which a franchise renewal could be denied.  The Proposed Decision would also require an expedited renewal application may not be submitted more than six months before the existing franchise expires, on the basis that it will prevent early applications filed in anticipation of violating a final non-appealable court order. 
 
The Proposed Decision would also provide that a California franchise renewal applicant that wishes to invoke the federal formal application process provided in 47 U.S.C. § 546 would be required to file and serve an application as provided in Article 2 of the Commission’s Rules of Practice and Procedure.  Under the Commission’s Rules, an Administrative Law Judge would be assigned to the proceeding and a specific procedural schedule would be adopted for the issues presented in the renewal application.  The Proposed Decision would conclude that this portion of the California video franchise renewal process would also be consistent with the federal formal process.  
 
In order to ensure that the Commission does not renew a video franchise if a video service provider is in violation of any final non-appealable court order issued pursuant to the California video franchise law, the Proposed Decision would require applicants to attest that no such violations are occurring or are alleged to be occurring.  In addition, the Proposed Decision would clarify that renewal applications would be subject to public comments regarding violations of a final nonappealable order.  If a violation has been found, the applicant must submit an order or ruling showing that the violations have been cured. 
 
The Proposed Decision further clarifies that ORA would also be permitted to submit comments that would allow it to “advocate on behalf of video subscribers regarding renewal of a state-issued franchise,” and to submit information regarding an applicant’s compliance with statutory obligations. 
 
For applicants that the Commission deems ineligible for franchise renewal based on the limited DIVCA criteria, the Commission’s Executive Director would be required to send a letter to the applicant within 30 days from the submission of the application, which would toll the 44-day application clock.  Following this notice from the Executive Director, the Commission would issue a decision or resolution denying the application, which would provide the applicant with a vehicle to seek an appeal of the decision. 
 
The Decision would reject all other remaining recommendations from parties on the basis that they seek a broader scope and expansive procedural steps for the franchise renewal process than is permissible under applicable law.
 
A copy of the Proposed Decision underlying this item is available at the following link
 
COMMISSIONER REPORTS
 
Commissioner Florio announced that his telecommunications advisor, Eric Van Wambeke’s one-year term would end on August 15, 2014 and that Mr. Van Wambeke will be replaced by Jessica Hecht, a former administrative law judge at the CPUC who has worked on telecommunications and water proceedings. 
 
Commissioner Sandoval gave a brief presentation on the Digital 395 project, which the CPUC helped to fund along with federal ARRA grants.  She noted that this was a very lengthy project that is 612 miles long and spans from Barstow and Reno.  She explains that this route enabled the Barstow end to connect to One Wilshire, one of the largest internet connection points in the world, and at the Reno end to connect to San Francisco, an important and robust internet connection point. 
 
In addition to addressing the Digital 395 project, Commissioner Sandoval also reported that her office recently assisted Siskiyou Telephone Company to resolve a significant problem with the United States Fire Services (“US Fire Services”).  She explained that earlier in the week, her office received a call from Jim Lowers, the President of Siskiyou Telephone Company because the United States Forest Services was fighting fires in Siskiyou County by setting back fires.  In the process of setting those back fires, the US Forest Services inadvertently burned more than 10,000 feet of copper and fiber cable belonging to Siskiyou.  She explained that the loss of the copper lines was very significant to Siskiyou and its customers, as these copper lines provided service to areas without commercial electricity and that copper was necessary to power and energize the lines so that people beyond electricity could get calls, including 911 calls.  She then explained that Mr. Lowers had tried to reach out to the U.S. Forest Service to ask them to cooperate on future burns in order to prevent the destruction of Siskiyou’s cables and had asked for assistance from Commissioner Sandoval’s office.  She commended Bill Johnston, her telecommunications advisor, for quickly getting in touch with the U.S. Forest Service and enlisting their cooperation to work together with Siskiyou to preserve their infrastructure in the future. 
 
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If you have questions regarding any of the above items, or the underlying proceedings in which they arose, please feel free to contact us.
 

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