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On January 16, 2014, the Commission held its regularly-scheduled agenda meeting.  Several significant telecommunications items were addressed in this meeting.  On the regular agenda, the Commission approved the decision that will expand the California LifeLine program to wireless providers.  The Commission approved a decision that assesses a $24.4 million fine against TracFone for its failure to collect and remit public policy program surcharges and user fees and Commission voted against the opening of a rulemaking that would have evaluated the privacy practices of telecommunications carriers.  On the consent agenda, the Commission also issued a decision requiring Vaya to pay access charges to AT&T on IP-initiated traffic.  Finally, Commissioner Ferron announced during Commissioner Reports that he is resigning from the Commission for health-related reasons.  This was Commissioner Ferron’s last meeting.  These and other items of interest are discussed in further detail below.   

REGULAR AGENDA

Decision Expanding the California LifeLine Program to Wireless Services (Item 51, approved 5-0) – This Decision modifies the California LifeLine program to accommodate wireless providers but defers issues related to LifeLine VoIP services to a second phase of the proceeding.  In addition, the Decision extends the existing LifeLine rate freeze at $6.84 for flat-rate local service and at $3.66 for measured-rate local service through June 30, 2015.
The Decision adopts the following specific rules and elements for wireless carriers who choose to participate in the LifeLine program: (1) a two-tiered system for reimbursements, a $5.75 reimbursement per participant for plans that offer 500-999 voice minutes, and a $12.65 reimbursement for plans that offer 1,000 or more voice minutes; (2) for plans that offer 1,000 or more voice minutes, a requirement to provide free, unlimited access to special services N11 numbers that do not count against a participant’s allotted minutes (211, 311, 511, 611, 711, 811, 911); (3) a mandate to provide equivalent rates for purchasing additional voice minutes and equivalent handsets; (4) a requirement to provide voice-grade connection and allow participants to cancel their service within 14 days of service activation without incurring early termination fees; (5) a requirement to permit withdrawal from the LifeLine program upon 30-day notice; and (6) an exemption from the pre-qualification process for pre-paid wireless providers.

The Decision also authorizes the Commission to begin the process for establishing a “California-only” LifeLine program that would not require LifeLine participants to provide the last four digits of their Social Security Numbers.  This program is inconsistent with the Federal Communications Commission’s (“FCC”) Lifeline Reform Order and the Decision does not address the impact of the resulting loss of federal funding by extending LifeLine services to participants that do not meet federal certification and qualification requirements.  Decision states that LifeLine providers would not be expected to make up the loss in federal funding, but defers specific rules and implementation for a future phase.  
 
Commissioner Sandoval introduced the item by extensively summarizing key revisions and changes imposed by the Decision.  She stated her conviction that the modifications to the LifeLine program will provide flexibility for customers and allow subscribers to choose the plan that best suits their needs.  Commissioner Peterman supported the Decision, explaining that it was an important step towards modernizing the California LifeLine program by extending benefits to wireless carriers in a changing telecommunications landscape.  She appreciated that the Decision makes LifeLine accessible while maintaining appropriate levels of protection to avoid waste, fraud, and abuse.  Commissioner Florio also supported the Decision, but noted concerns with the second phase of the proceeding, which would address LifeLine VoIP.  Commissioner Ferron expressed his support for the Proposed Decision, articulating his appreciation for the balance that the Decision strikes in addressing financial prudency.  President Peevey noted that the LifeLine program needed updating and explained that the Decision makes LifeLine relevant again by allowing customers to select the plan that works best for them. 
 
During the public session of the agenda meeting, several speakers spoke out in support of the Proposed Decision.
A copy of the Proposed Decision underlying this item is available at the following link

Petition for Rulemaking on the Privacy Practices of Telecommunications Corporations (Items 50 and 50a, Item 50 approved 4-1) – This Decision denies a Petition for Rulemaking by a group of consumer groups for a rulemaking to examine privacy issues for telecommunications carriers. 

In November 2012, the Consumer Federation of California, The Utility Reform Network, and the Privacy Rights Clearinghouse (“Joint Consumers”) filed a Petition for Rulemaking (“Petition”) to modify the privacy practices telecommunications carriers.  The Joint Consumers requested that the Commission open a new rulemaking to review the privacy practices of telecommunications carriers and to develop wireless privacy standards.  The Petition identified potential concerns related to the collection and use of personal information by telephone corporations, including companies that provide wireless telecommunications services.  The Petition also asked the Commission to develop standards for collecting, handling, and sharing customer information to ensure that customers are aware of what information may be collected and how that information may be used.  The Petition sought to extend the proposals identified in the Petition to third parties under contract with telecommunications providers, such as distributors of phone applications or “apps.”  In addition, the Petition suggested that existing laws and policies at the state and federal level fail to offer adequate protection for customer information.
 
This Decision denies Joint Consumers’ petition and finds that it is not clear that a review of telecommunications companies’ privacy practices in California is necessary at this time.  The Decision recognizes the importance of protecting the privacy of customer information, and notes that the Commission is addressing issues related to privacy of energy user data in the ongoing Smart Grid proceeding.  However, the Decision finds that the Petition failed to provide examples of actual breaches of customer privacy by telecommunications corporations.  The Decision also concludes that current federal and state laws exist to govern the treatment of potentially sensitive customer information held by telecommunications providers, as well as businesses in general.  Finally, the Decision concludes that the Petition fails to clearly identify the types of information the petitioners believe are accessible to or collected by telecommunications corporations that are not currently protected by CPNI and other existing privacy protections. 
 
The Petition was opposed by CTIA – the Wireless Association (“CTIA”), Pacific Bell Telephone Company dba AT&T California (“AT&T”), and MetroPCS California Inc. (“MetroPCS”).  The opposing parties argued that the Petition was procedurally and substantively improper.  Specifically, the parties asserted that the Petition failed to state a clear justification for new rules and failed to include any specific language for those rules.  In addition, these parties argued that existing laws and policies already protect the privacy of customer information and additional rules are unnecessary.  The opposing parties also argued that the Petition attempted to reach non-regulated services and providers beyond the Commission’s jurisdiction.
 
In October 2013, Commissioner Sandoval issued an Alternate Proposed Decision that would have granted the Joint Consumers’ Petition in part.  The Alternate would have opened a rulemaking that focuses on the privacy practices of telephone corporations under its jurisdiction (recognizing that the Commission has no jurisdiction over third parties). 
 
This item was introduced by Commissioner Ferron, who acknowledged that telephone companies possess a tremendous amount of information about their customers, and that companies have the capability of utilizing this information for a wide-range of marketing purposes.  However, he explained that after a review of the existing laws, he believed that the Petitioners failed to identify privacy issues that are not already addressed in state and federal rules.  He also noted that the petitioners failed to identify instances of actual breaches.  He then noted that he recognized the ongoing need to monitor this issue, and explained that the Commission will continue to track the privacy practices of telephone companies outside of any formal rulemaking.  Commissioner Peterman and President Peevey extended their support for Commissioner Ferron’s proposed decision and agreed with Commissioner Ferron’s comments. 
 
Commissioner Sandoval introduced the Alternate, explaining that it would open a rulemaking to address gaps in the privacy rules.  She questioned whether the aggregation and dissemination of such data, for instance location data, is consistent with existing rules and whether existing rules need to be updated.  Commissioner Florio extended his support for the Alternate.  However, in light of President Peevey and Commissioner Peterman’s position, Commissioner Sandoval declined to move the alternate.  With the alternate off the table, Commissioner Florio also voted in favor Commissioner Ferron’s proposed decision.  
 
A copy of the Proposed Decision underlying this item is available at the following link
 
A copy of the Proposed Alternate is available at the following link:  
 
TracFone Fined $24,397,441 For Failure to Collect and Remit User Fees and PPP Surcharges (Item 52, approved 5-0) – This Decision resolves the second phase of the Commission-initiated investigation into TracFone’s failure to pay user fees and PPP surcharges.  This Decision orders TracFone Wireless, Inc. (“TracFone”) to pay $24,397,441.17 to the Commission, an amount equal to the full amount of user fees and public purpose program surcharges (“PPP surcharges”), including interest, accrued prior to February 24, 2012. 
 
TracFone is a prepaid wireless carrier that operates in California and many other states throughout the country.  In California, telecommunications companies regulated by the Commission are required to pay user fees and PPP surcharges on all intrastate call revenue, which are generally collected from the end-user by the carrier and remitted to the Commission.  TracFone did not collect user fees from 2004 through 2012 or PPP surcharges from at least 2000 through 2012.  During these periods, TracFone also did not remit user fees or PPP surcharges to the Commission.
 
The methodology adopted by the Decision for calculating user fees and PPP surcharges is to take the inverse of the interstate percentages used for TracFone’s FCC filings (“FCC Inverse”), by utilizing information on TracFone’s Form 499-A.  The Decision explains that the FCC Inverse methodology is the  most appropriate for the purposes of determining intrastate revenues for the 12 years at issue in this proceeding, and that it functions regardless of how the FCC interstate revenue was calculated. 
 
The Decision also declines to assess penalties, finding that the violation did not result in any specific economic harm.  The Decision concludes that the Commission’s public purpose programs were always fully funded and that the amounts owed by TracFone were relatively small portions of the overall budget of the programs.  The Decision also explains that the fees and surcharges were never collected, and therefore did not result in an economic benefit to TracFone.  Additionally, the Decision agrees that TracFone’s apparent reliance on staff advice as the basis for not collecting and remitting fees and surcharges mitigated the need for assessing penalties. 
 
Commissioner Florio introduced the item, explaining that in the first phase of the proceeding the Commission found that TracFone violated of the Commission’s rules and regulations by failing to remit PPP surcharges and user fees on prepaid cellular services.  He elaborated that this Decision resolves Phase 2 of the proceeding, which was to quantify the PPP surcharges and user fees owed to the Commission as a result of TracFone’s violation.  He further noted that the $24.4 million includes the 10% interest required by G.O. 153, and while penalties were not officially assessed, the $24.4 million is out of pocket money and effectively serves as a penalty.  No other Commissioners commented on this item. 
 
A copy of the Proposed Decision underlying this item is available at the following link
 
CLOSED SESSION ITEMS
 
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 60 and 61, held) – These items would address 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, 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.  An application for rehearing of this decision was also timely filed.  

CONSENT AGENDA

Vaya Ordered to Pay Access Charges to AT&T for Traffic Originating in VoIP Format (Item 11, approved on consent) – This Decision resolves two complaints filed between Vaya Telecom, Inc. (“Vaya”) and Pacific Bell Telephone Company d/b/a AT&T California (“AT&T”).  Vaya is a wholesale provider of VoIP routing services for retail VoIP service providers such as Skype and Vonage.  The first complaint was filed by Vaya, which asserted that AT&T improperly assessed switched access charges on terminating and transiting VoIP traffic that Vaya delivered to AT&T.  A second complaint was filed by AT&T against Vaya asserting that Vaya breached the parties’ interconnection agreement by delivering interLATA traffic over local interconnection trunks. 

On the first issue, the Decision finds that Vaya is subject to access charges when it delivers interexchange traffic to AT&T whether or not the traffic originates in VoIP format.  The traffic at issue in this case originates with Vaya’s customers in IP format, which Vaya converts to TDM format for delivery to AT&T for termination or for transit routing service to another carrier.  Vaya claimed that access charges are inapplicable to VoIP traffic based on federal laws and its interconnection agreement with AT&T.  The Decision concludes that federal laws does not exempt Vaya from paying access charges, explaining that Vaya cannot rely on an Enhanced Service Provider (“ESP”) exemption because it relied upon its CLEC status to interconnect with AT&T.  The Decision also explains that the parties’ interconnection agreement does not exempt VoIP traffic.  Specifically, the Decision finds that the interconnection agreement contains no separate classification for VoIP traffic, classifying traffic for the purposes of compensation as Local, Transit, intraLATA or interLATA based on the telephone numbers of the calling and called parties.

On the second issue, the Decision finds that Vaya violated the terms of the interconnection agreement by delivering interLATA traffic to local interconnection trunks.  Vaya had claimed that VoIP traffic is not subject to switched access, and therefore may be delivered over local interconnection trucks.  The Decision rejects Vaya’s position, explaining that the interconnection agreement specifically provided that the parties shall not terminate interLATA traffic over local interconnection trunks.  This Decision resolves all issues of the two complaints and orders AT&T and Vaya to meet and confer and to file a joint statement that shows the amount of traffic transmitted by Vaya to AT&T, the classification of the traffic, amounts paid to AT&T for transmission of that traffic, and additional amounts due to AT&T for termination. 

A copy of the Proposed Decision underlying this item is available at the following link:  

Statutory Deadline Extended in XO Communications v. Vaya (Item 36, approved on consent) – This Decision extends the statutory deadline for resolving a complaint filed by XO Communications Services, LLC (“XO”) against Vaya Telecom, Inc. from December 21, 2013 to June 21, 2014.  XO Communications alleged that Vaya was required to pay intrastate switched access termination charges for intrastate toll calls pursuant to XO’s intrastate switched access tariff.  The parties have since notified the Commission that they have reached a settlement, and the Commission has drafted a proposed decision to dismiss the complaint.  The Decision finds that an extension of the statutory deadline is therefore appropriate to allow the Commission to render this decision.

A copy of the Proposed Decision underlying this item is available at the following link

Budget PrePay Conditionally Granted ETC Designation (Item 5, approved on consent) – This Draft Resolution conditionally designates Budget PrePay, Inc. (“Budget”) as Eligible Telecommunications Carriers (“ETC”) to provide federal Lifeline service in the Uniform Regulatory Framework carrier service territories.  The Draft Resolution also determines that granting Budget PrePay’s request for ETC designation is in the public interest and that Budget PrePay meets all applicable environmental, technical, and financial requirements in Resolution T-17002 and the ETC rules recently adopted in the Lifeline Reform Order (FCC 12-11). 

Additionally, the Draft Resolution finds that Budget PrePay’s Lifeline service will allow consumers to receive both federal and state subsidized wireline service and will not have an adverse effect on the state LifeLine fund.  Budget PrePay is required to file annual ETC reports and information with USAC demonstrating the terms and conditions of any voice telephony service plans offered to Lifeline subscribers.

A copy of the Draft Resolution underlying this item is available at the following link

IXC Holdings, Inc. Transferred to Telekenex (Item 39, approved on consent) – This Decision authorizes the transfer of assets and control over the public utility operations of IXC Holdings, Inc. (“IXC”) to Telekenex Acquisition Corporation (“Telekenex Acquisition”).  Telekenex Acquisitions is a Delaware corporation formed specifically for this transaction.  Following the completion of the transaction, Telekenex Holdings, LLC (“Telekenex Holdings”), who is wholly-owned by Spire Capital Partners III, LLC, will control 82% equity interest in Telekenex Acquisitions.  The current management investors of IXC will own 16% of Telekenex Acquisitions in the aggregate, with no single investor holding more than 10% of the equity interest. 

The Decision finds that the application failed to disclose that two of the individuals identified as members of Telekenex Acquisition’s management group were associated with a telecommunications carrier that was subject to prior consumer protection violations.  Counsel for Telekenex Acquisitions explained that the two individuals were not part of the management group at the time the application was filed, and that neither individuals will become an officer before the closing.  The Decision finds the explanation insufficient, explaining that required disclosures may not be narrowly limited to a particular timeframe of the applicant’s choosing.  Rather than denying the application, the Decision imposes additional requirements onto the Telekenex Acquisitions to (1) report any bankruptcy filing and (2) any sanction imposed by the FCC or any state regulatory agency of any subsequent director, officer, partner, or owner of more than 10% of Telekenex Acquisition that may occur over the next three years.  The Decision also states that the failure to disclose any violation within 90 days will result in the forfeiture of the CPCN. 

Despite the disclosure issues with the application, the Decision approves the transaction, finding that the transaction serves the public interest because customers will continue to receive service under the same rates, terms, and conditions as before the transaction. 

A copy of the Proposed Decision underlying this item is available at the following link:  

Refunds Granted to XL Fire Protection Regarding Dispute With WTI Communications (Item 29, approved on consent) – This Decision resolves all issues related to a complaint filed by XL Fire Protection (“XL”) against WTI Communications (“WTI”).  WTI is competitive local exchange carrier.  XL is a contractor that designs, installs and repairs fire sprinkler systems in residential, commercial, and industrial facilities.  In 2009, XL entered into a two-year service agreement with WTI for the provisioning of services, the monthly recurring cost was quoted as $991.73.  XL claims that WTI promised to credit its account for various service outages, problems with XL’s phone services, and costs for repairs to address WTI’s installation or software issues.  WTI argued that XL failed to show that it did not meet its contractual obligation, that XL never intended to fulfill its two-year contract, that the service problems were caused by XL’s antiquated internal phone system, and because XL did not dispute the sums with written notice within 30 days as required by the service agreement. 

The Decision finds WTI’s assertions without merit, concluding that XL fulfilled its two year contractual obligation and that if XL’s system was too antiquated WTI should have known at the time of installation and could have declined to provide service.  Therefore, the Decision authorizes the disbursement of $3,659.41 currently held by the Commission in the impound account to XL.  The Decision also orders WTI Communications to refund XL Fire Protection $126.89 for service outages, finance charges, repair services, and overbilling that exceeds the funds held in impound.  The Decision denies XL’s request for the additional balance of $3,038.56, as it cannot verify additional actual damages associated with this amount.

A copy of the Proposed Decision underlying this item is available at the following link:  

Statutory Deadline Extended in City of Santa Barbara v. Verizon Case (Item 38, adopted on consent)  – This Decision extends the statutory deadline for resolving a dispute between the City of Santa Barbara (“Santa Barbara”) and Verizon California, Inc. (“Verizon”) until January 19, 2015.  This dispute involves the interpretation of a tariff governing the undergrounding of existing telephone communications facilities where a city creates a new underground utility district.  Santa Barbara filed this complaint on January 19, 2010 and the parties initially agreed to resolve the dispute by filing motions for summary judgment based on a stipulated set of undisputed facts.  However, the parties were unable to stipulate to a set of facts.  Nevertheless, both parties filed Motions for Summary Judgment and the Administrative Law Judge (“ALJ”) issued a proposed decision based on the Motions.  After the proposed decision was issued, Southern California Edison Company, San Diego Gas & Electric Company and the City of Santa Monica filed Motions for Party Status.  Previously-assigned ALJ Ryerson subsequently retired from state service and the proposed decision was withdrawn from consideration.  The proceeding is now moving forward, and both Verizon and Santa Barbara have filed renewed motions for summary judgment.  This Decision finds that an extension of time is necessary to allow time to review additional material submitted for the record, pending motions for summary judgment, and additional parties that wish to participant in the case. 
 
A copy of the Proposed Decision underlying this item is available at the following link:   
 
Customer Complaint Against Verizon Resolved (Item 27, approved on consent) – This Decision resolves all issues in a customer complaint against Verizon California Inc. (“Verizon”).  Complainant contended that Verizon created a fictitious account under her name and continued to charge her for telephone service after she moved from Apple Valley to Palm Springs.  Complainant was a Verizon customer in both locations.  Complainant also asserted that the disputed amounts in their entirety should be categorized as LifeLine credits.  Verizon contends that it did not charge Complainant for a fictitious account, but created a fictitious account to begin collecting for the outstanding balance on Complainant’s Apple Valley Account.  Verizon also explained that the outstanding balance already accounted for LifeLine credits, and therefore the full amount in dispute does not constitute LifeLine credits.  The Decision finds that testimony and written evidence presented during a hearing all support Verizon’s contentions.  However, the Decision does find that Complainant is entitled to an additional $25.96 in LifeLine credits, bringing the remaining balance on Complainant’s account to $325.41.  The Decision also finds that the Complainant has failed to demonstrate that Verizon’s charges were inaccurate, excessive, or in violation of any applicable rule, law or tariff administered by the Commission.

A copy of the Proposed Decision underlying this item is available at the following link

HELD ITEMS

Ponderosa’s Application for $1,027,380 in CASF Funding for its Cressman Project (Item 4, held by staff until 2/4/14) – This Draft Resolution would grant $1,027,380 in CASF funding to Ponderosa Telephone Company (“Ponderosa”) for its Cressman 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.  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

Golden Bear Broadband’s CPCN Application (Item 20, held by Peterman until 2/4/14) – This Decision would grant Golden Bear Broadband, LLC (“GBB”) a certificate of public convenience and necessity (“CPCN”) in order to provide full-facilities based and resold competitive local exchange service in the service territories of Pacific Bell Telephone Company d/b/a AT&T California (“AT&T”), Verizon California Inc. (“Verizon”), Citizens Telecommunications Company of California, Inc. d/b/a Frontier Communications of California (“Frontier”), Frontier Communications of the Southwest, Inc. (“Frontier Southwest”) and SureWest Telephone (“SureWest”).

GBB proposes to provide dedicated private line special access services to business customers and carriers by using the facilities of other providers and the limited development of its own facilities in Northern California.  GBB has also submitted a California Advanced Services Fund (“CASF”) request, and if granted, GBB may expand the services to provide broadband-enabled services to additional business and residential customers. 

The Decision would also find that GBB meets the environmental, technical, and financial requirements to be granted a CPCN, and would subject GBB to all applicable Commission rules, decisions, General Orders, and statutes that pertain to California public utilities. 

A copy of the Proposed Decision underlying this item is available at the following link:

COMMISSIONER REPORTS

Commissioner Ferron announced his resignation based on issues related to his ongoing battle with prostate cancer.  Each of the Commissioners also took the opportunity to express thoughtful comments about Commissioner Ferron. 
 
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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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