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On February 27, 2014, the Commission held its regularly-scheduled agenda meeting, and several key telecommunications items were addressed.  On the consent agenda, the Commission adopted a resolution increasing the California Advanced Services Fund (“CASF”) surcharge rate from 0.164% to 0.464% effective April 1, 2014 and approved a decision that modifies the eligibility requirements in the CASF program to allow non-telephone corporations to apply for funding.  The Commission also issued another hold on the proposed decision that would grant CASF funding to Ponderosa for its Cressman project.  In the closed session, the Commission denied the Independent Small LECs’ rehearing request on the decision that imposed a one-year freeze in the rate case schedule and the CHCF-A waterfall mechanism.  The Commission also addressed Kerman’s applications for rehearing related to a decision denying an all-party settlement agreement and a decision denying Kerman’s request for interim rate relief and staying Kerman’s routine general rate case.  These and other items of interest on the Commission’s agenda are discussed in further detail below.
 
CONSENT AGENDA
 
CASF Surcharge Increased from 0.164% to 0.464% Effective April 1, 2014 (Item 14, adopted on consent) – This Resolution increases the surcharge rate for the California Advanced Services Fund (“CASF”) program from 0.164% to 0.464%.  Telecommunications carriers and VoIP service providers are required to revise the CASF surcharge rate assessed on revenues collected from end users for intrastate telecommunications services effective April 1, 2014. 
 
The Resolution concludes that a surcharge increase is necessary to allow the CASF program to have the funds available to meet the new requirements imposed by SB 740 and AB 1299.  SB 740 authorized the collection of an additional $90 million for the CASF Broadband Infrastructure Grant Account and AB 1299 created the Broadband Public Housing Account to support the deployment of broadband networks and adoption programs in eligible publicly supported communities.  In addition, the Resolution also determines that the existing 0.164% surcharge rate in insufficient as it has been collecting less than the $25 million cap limit per calendar year from 2011 – 2013.  Therefore, increases in collection above the $25 million cap per year are necessary to make up for the previous years of under collection and to meet the new program requirements imposed by the Legislature. 
 
A copy of the Draft Resolution underlying this item is available at the following link
 
Decision Modifying CASF Eligibility Criteria to Permit Non-Telephone Corporation Applicants (Item 5, adopted on consent) – This Decision modifies the eligibility criteria for the California Advanced Services Fund (“CASF”) program to establish rules for non-telephone corporations to apply for CASF grants.  The Decision is consistent with legislative directives mandated by the passage of SB 740 (Padilla) in October 2013. 
 
The Decision grants existing facilities-based providers a “right of first refusal” against a non-telephone corporation proposing to serve an area with CASF funds, allowing these providers with an opportunity to extend or upgrade existing service to the proposed area (with the option of applying for CASF funding).  
 
The Decision also imposes several requirements for non-telephone corporations who choose to apply for funding from the CASF program.  First, non-telephone corporations will be required to obtain a performance bond in the full amount of project for the duration of the construction period to ensure that the project is completed in accordance with the approved grant.  Second, the Decision requires a non-telephone corporation applying for a CASF grant that has been providing broadband service for less than 12 months to meet a liquidity requirement of 10% of the total project cost in cash or cash equivalents, including but not limited to a certificate of deposit with a reputable bank or financial institution, preferred stock proceeds or other corporate shareholder equity, or a letter or line of credit.  The liquidity requirement will be capped at $100,000.  Third, the Decision reiterates that CASF applicants and grantees, whether telephone corporations or non-telephone corporations, will be required to comply with the Commission’s Rule 1.1, which requires applicants to sign under penalty of perjury that to the best of their knowledge all statements and representations made in an application to the Commission are true and correct. 
 
The Decision declines to adopt a compliance bond post-construction, finding that entities would have substantial difficulties obtaining a compliance bond since the post-construction obligations could not be quantified in any generalizable manner.  However, the Decision also imposes a separate obligation on non-telephone corporations to promptly notify the Commission of any plans to sell or transfer assets would also be imposed on non-telephone corporations.  This obligation will remain for 3 years as of the date of the projects completion.
 
A copy of the Proposed Decision underlying this item is available at the following link:  
 
XO’s Motion to Dismiss Complaint Against Vaya Granted (Item 29, approved on consent) – This Decision grants XO Communications Services LLC’s (“XO”) unopposed motion to dismiss with prejudice its complaint against Vaya Telecom, Inc. (“Vaya”).  The motion explained that XO and Vaya resolved the issues raised by the complaint to their mutual satisfaction through a settlement agreement.  XO Communications alleged in its complaint that Vaya was required to pay intrastate switched access termination charges for intrastate toll calls pursuant to XO’s intrastate switched access tariff. The Decision finds that dismissal is appropriate since the parties reached a mutually agreeable resolution and because dismissal would conserve parties’ and the Commission’s resources.  Although the terms of the settlement are confidential, it is likely that the settlement posture was affected by the recent decision finding in favor of AT&T in a similar complaint against Vaya.
 
A copy of the Proposed Decision underlying this item is available at the following link
 
Channel Island Withdraws Application to Extend CPCN Authority (Item 19, approved on consent) – This Decision grants Channel Islands Telephone Company’s (“CITC”) unopposed motion to withdraw its application to expand its existing CPCN to include full facilities based authority to construct telecommunications facilities to serve the Channel Islands.  CITC had sought to extend its CPCN authority in order to provide telecommunications services to the Channel Islands through funding from the Rural Telecommunications Infrastructure Grant Program (“RTIGP”).  CITC’s request for RTIGP funding was ultimately denied by the Commission.  As a result, CITC amended its CPCN application to reflect project changes given the denial of grant funding.  The Wishtoyo Foundation and the Santa Ynez Band of Chumash Indians protested the amended application on the basis that service was defective and that the proposed project would negatively impact the Chumash culture.  A pre-hearing conference was subsequently held and a schedule that included public participation hearings was tentatively set.  Shortly after the pre-hearing conference, CITC moved to withdraw the amended application “after careful consideration.”  CITC did not provide any additional reason or basis for withdrawing its application.  Since the motion to withdraw was uncontested, the Decision concludes that granting CITC’s request provides the relief requested and allowing CITC to withdraw the amended application is appropriate. 
 
A copy of the Proposed Decision underlying this item is available at the following link:   
 
Greenlining Granted $22,972.00 in Intervenor Compensation for Work on Basic Service Decision (Item34, adopted on consent) – This Decision grants The Greenlining Institute (“Greenlining”) $22,972.00 in intervenor compensation for its contribution to D.12-12-038 (Basic Service).  The Decision finds that Greenlining provided recommendations on these Decisions and Resolutions warranting intervenor compensation.  The Decision orders an award to be paid from the CPUC’s Intervenor Compensation Fund within 30 days of the effective date of the Decision. 
 
A copy of the Proposed Decision underlying this item is available at the following link:   
 
HELD ITEMS
 
Ponderosa’s Cressman CASF Project (Item 3, held by Florio until 3/13) – This Draft Resolution would grant $1,027,380 in CASF funding to Ponderosa Telephone Company (“Ponderosa”) for its Cressman Unserved and Underserved Broadband Project (“Cressman Project”).  This amount represents 60% of the total project costs, and will supplement Ponderosa’s funding of $684,920.  The project would bring fixed broadband services to the underserved Cressman area of Fresno County.

The Cressman Project would upgrade an existing system and install new systems and infrastructure to provide high speed Internet service over a 3.56 square mile area.  Ponderosa would expand its existing network by extending fiber optic backhaul facilities and connecting to multiple Broadband Loop Carrier systems (“BLC”).  The fiber would extend from an upgraded BLC site at Sierra Cedars to two new BLC sites at Lower Cressman and Rush Creek.  The installations would also utilize Ponderosa’s existing copper distribution plants in a fiber-to-the-node configuration and deploy VDSL2 and ADSL2+ technologies to connect end users. 

The Draft Resolution finds that the project would have positive safety impacts by providing telephone and broadband access for emergency services in a remote area threatened by fire and harsh weather conditions.  In addition, the Draft Resolution would conclude that connecting the Cressman community’s access to anchor institutions surrounding the Cressman Project area would also be beneficial. 
 
A copy of the Draft Resolution underlying this item is available at the following link:   
 
Proposed Comments to the FCC Regarding TDM to IP Transitions (Item 43, held by staff until 3/13) – This item would authorize the staff to file comments with the Federal Communications Commission (“FCC”) in response to a Further Notice of Proposed Rulemaking (“FNPRM”) seeking to establish a series of data collection initiatives that will allow the Commission to evaluate the customer impact transitioning from traditional TDM-based service to an IP-network.  Specifically, the FCC seeks: (1) detailed proposals to test real-world applications of planned changes in technology that are likely to have tangible effects on consumers; and (2) feedback on the FCC’s efforts to improve data collection regarding the impact of technological evolutions on network values to promote informed data-driven decision making. 
 
The staff memorandum supporting this item is not currently available, but a copy of the FNPRM is available at the following link
 
CLOSED SESSION ITEMS
 
Independent Small LECs’ Request for Rehearing of Decision Imposing a One-Year Freeze in Rate Case Schedule and Waterfall Mechanisms Denied –(Item 53, adopted on consent) – This Decision denies the Independent Small LECs’ request for rehearing of Decision (D.) 13-02-005, which implemented a one-year freeze until December 31, 2013 in the general rate case schedules and waterfall provisions for California High Cost Fund-A (“CHCF-A”) recipients.  D.13-02-005 generally adopted a request by the Independent Small LECs to implement a one-year freeze in the rate case schedule and the waterfall mechanisms.  However, D.13-02-005 failed to adopt the Independent Small LECs’ request to lift the stay on December 1, 2013, thereby creating a problem regarding the timing of any rate case filings brought at the end of 2013.  Since D.91-09-042 directed CHCF-A recipients to file a rate case by December 31st to avoid the effects of the waterfall cycle, the stay implemented by the D.13-02-005 could have prevented the Independent Small LECs from filing a rate case in time to prevent the triggering of the waterfall effect.  D.13-02-005 also improperly authorized the assigned Administrative Law Judge (“ALJ”) to extend the stay for six months on the request of any party to the proceeding.  The Independent Small LECs filed an application for rehearing on the basis that D. 13-02-005 improperly:  (1) set the deadline for lifting the stay on rate case in a manner that could force the companies into the waterfall mechanism; and (2) unlawfully empowered the assigned ALJ to extend the stay/freeze for six months without the consent of the CHCF-A recipients.
 
The Decision denies the application for rehearing without fully addressing the arguments raised by the Independent Small LECs in their rehearing request and concluding that the rehearing request is moot on the basis that the stay/freeze extension was later granted based on a joint motion submitted by the Independent Small LECs. 
 
A copy of the Decision underlying this item is available at the following link
 
Kerman’s Applications For Rehearing of Decision Denying All-Party Settlement Agreement and Decision Denying Its Request For Interim Rate Relief And Staying Its General Rate Case (Items 49 and 50) – These items addressed two applications for rehearing filed by Kerman Telephone Co. (“Kerman”).  In December 2011, Kerman filed a routine general rate case application to address unreasonably low earnings under its current rate design.  After being urged to settle the case, Kerman entered into an all-party settlement agreement resolving all issues pertaining to Kerman’s general rate case application with Division of Ratepayer Advocates (“DRA”).  The joint motion to adopt the all-party settlement was denied in D.12-12-003 (“Settlement Decision”), and Kerman timely filed for rehearing of the decision.  In January 2013, after entering the test year utilized in filing its general rate case application, Kerman filed a motion for interim rate relief.  D.13-10-051 denied the request for interim rate relief, stayed Kerman’s rate case application, and froze Kerman’s California High Cost Fund-A (“CHCF-A”) draw until December 31, 2013 (“Stay Decision”).  An application for rehearing of this decision was also timely filed. 
 
The Decisions generally do not address the arguments presented by Kerman in their rehearing requests, and order modifications to the Findings of Fact and Conclusions of Law in both the Settlement Decision and the Stay Decision.  Decision (D.) 14-02-043 modifies the Settlement Decision by ordering additions to the Findings of Fact and Conclusions of Law that relate to the pending CHCF-A proceeding (R.11-11-007), the CHCF-A program, details regarding the procedural history of the Settlement Decision, and additional findings regarding the presentation of the joint motion for adoption of the settlement agreement.  D.14-02-044 similarly orders modifications to Finding of Facts and Conclusions of Law of the Stay Decisions.  Specifically, D.14-02-044 orders additional findings regarding the pending CHCF-A proceeding and program, relevant procedural history, and additional conclusions derived from the Stay Decision.  Aside from these limited modifications, the Decisions deny Kerman’s rehearing requests.    
 
A copy of the Decision addressing the Settlement Decision is available at the following link:  

A copy of the Decision addressing the Stay Decision is available at the following link:  

COMMISSIONER REPORTS
 
Commissioner Sandoval recently attended a conference at the University of Colorado, Boulder Law School where she spoke about various aspects of universal service as addressed in the NARUC Legislative Task Force Report on Federalism and Telecom.  She also had a chance to speak to FCC Chairman Wheeler at this conference.  Commissioner Sandoval also attended the NARUC conference in Washington D.C. where she spoke on a panel that focused on state universal service programs.  In that panel, she highlighted California’s broadband initiatives and the California Advanced Services Fund.  At the conference, she also moderated a panel on IP-interconnection. 

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