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On June 26, 2014 the Commission held its regularly-scheduled meeting.  On the regular agenda, the Commission unanimously adopted the Resolution implementing modifications to the CASF program, including SB 740’s right of first refusal opportunity and new application deadlines.  The Commission also authorized Staff to file comments with the FCC regarding a state commission’s authority to adjudicate intercarrier compensation disputes for ISP-bound traffic.  The Proposed Decision addressing DIVCA franchise renewals was held, along with the Proposed Decisions that would assess a fine of $19 million against a telecommunications carrier and its primary owner for improper charges to customers.  These and other items of interest are identified below.   
 
REGULAR AGENDA
 
Resolution Adopting New CASF Application Timelines (Item 41, approved 5-0) – This Resolution implements new timelines to the California Advanced Services Fund (“CASF”) program and specifies how and when local government agencies and non-telephone corporations may apply for funding pursuant to Senate Bill (SB) 740.  The Resolution also describes how the Commission will provide an existing facilities-based broadband service provider with an opportunity to demonstrate that it will upgrade service in its territory, which it claims meets the “right of first refusal” opportunity required by SB 740. 
 
The Resolution explains that although non-telephone corporations are now eligible to apply for CASF funds, SB 740 requires that existing providers have an opportunity to demonstrate that they will, within a reasonable amount of time, upgrade service in their existing underserved territories.  The Resolution clarifies that only non-telephone corporations are subject to an existing provider invoking its “right of first refusal.”  The Resolution provides that a service provider invoking the “right of first refusal” with the intention of utilizing its own funds will have until November 1, 2014 to make a commitment to the Commission to upgrade its services.  This provider will have six months, or until May 1, 2015 to complete the project, during which time the Commission will not award a CASF grant to fund a project in the same project area.  On or before May 1, 2015, carriers will be required to submit documentation regarding broadband availability and speed tiers available, including speed tests showing that the project area indeed provides speeds that would constitute served.  The Resolution will also allow a modest opportunity for carriers to request an extension if the completion of the project is delayed due to permitting issues, CEQA compliance issues, or due to weather or other acts of God.  The Resolution acknowledges ORA’s concern regarding the “right of first refusal” allowing existing service providers to “game the system,” but refuses to issue a mandatory Rule 1 violation if a provider fails to finish a project on the basis that it would discourage existing providers from upgrading their networks. 
 
The Resolution clarifies that regardless of whether a service provider invokes the “right of first refusal,” existing providers will always have the opportunity to challenge CASF applications for project areas that are already served.  The Resolution explains that the right to challenge an application is provided under the Public Utilities Code and existing CASF rules. 
 
The Resolution reiterates that non-telephone corporations must provide last mile-broadband access to households that are unserved by an existing facilities-based provider and may only receive funding to provide access to households that are unserved or underserved.  The Resolution also reiterates that non-telephone corporations applying for CASF funding must meet the requirements outlined in D.14-02-018, which require these providers to obtain a performance bond in the full amount of project for the duration of the construction period and a liquidity requirement of 10% of the total project cost or no more than $100,000 in cash or cash equivalents.   
 
This Resolution also imposes a rolling application period beginning December 1, 2014 and will allow local government agencies to begin applying for CASF grants for areas that service providers had invoked their “right of first refusal” on May 2, 2015 if those projects are incomplete.  The Resolution also designates certain “priority areas” based on information received from consortiums, which will be available on the Commission’s website. 
 
This item was introduced by the Communications Division Staff, who explained that the Resolution implemented certain provisions of SB 740 in regards to the timing of application and identifies priority areas.  Staff’s presentation outlined the key elements of the Resolution, as described above.
 
Commissioner Sandoval thanked the Communications Division and President Peevey for their leadership in this area.  She explained that the Commission has a strong interest in ensuring first-class broadband access for all members of the community.  She observed that under the Resolution, a local government would only be allowed to apply for CASF funding if no other entity has applied.  She sought clarification from staff that this limitation would not prevent a local government from applying if another entity had technically applied, but the application and/or project failed.  She reminded the audience of her travels through rural California, where she learned that people are “crying out” for more broadband service, more wireless, and in some cases Plain Old Telephone Service.  She then commended the Regional Consortia groups for their efforts in this area, and for their assistance in developing the priority areas.  She observed that the leadership provided by the Consortia groups have been extremely helpful in providing local-led, local-based efforts and have encouraged a dialogue and extreme attention to local issues and the local differences.  She then encouraged the Staff and the Commission to consider ways of extending funding to consortia groups for their efforts.  She then reported that she has working with Consortia groups and Chico State to prepare overlay maps that identify high wildfire danger areas with areas that are unserved or underseved by broadband.  She explained that such a map would be extremely helpful in firefighting efforts, as she had observed in Cal-Ore’s service territory, where the fire lookout station was extremely well supported with telephone and broadband by Cal-Ore.  She encouraged the Commission to consider better investments in communications technology to support firefighting.
 
Commissioner Florio also offered his support for the Resolution and noted that he particularly liked the designation of priority areas.  He explained that he had concerns in the past about the CASF project’s “wait and see” approach that was dependent on what was brought to the Commission.  He explained that he appreciates having a priority list that can be referred to going forward. 
 
A copy of the Resolution underlying this item is available at the following link
 
CONSENT AGENDA
 
Staff Authorized to File Comments on Intercarrier Compensation Dispute(Item 44, approved on consent) – This item authorizes Commission staff to file comments in response to the FCC’s request for comment on a petition for declaratory order filed by the Pennsylvania Public Utility Commission.  The Pennsylvania Commission seeks clarification on whether it may adjudicate intercarrier compensation disputes arising out of 11 U.S.C §§ 251, 253 involving the exchange of local dial-up Internet Service Provider (“ISP-bound) traffic.  The Petition also seeks clarification on whether a decision issued by the Pennsylvania Commission properly enforced the FCC’s ISP Remand Order and is consistent with FCC rules.  In the event that the FCC finds that the Pennsylvania Decision improperly enforced the ISP Remand Order, or is inconsistent with FCC rules, the Petition requests that the FCC issue a declaratory ruling describing procedures for state commissions to follow when attempting to resolve intercarrier compensation disputes and adjudications involving local dial-up ISP-bound traffic exchanged by indirectly interconnected CLECs.
 
The Pennsylvania Commission filed the Petition after the U.S. District Court for the Eastern District of Pennsylvania overturned the Pennsylvania’s Commission’s ruling on an intercarrier compensation dispute between AT&T Communications of Pennsylvania, LLC and TCG Pittsburgh, Inc. (collectively “AT&T”) and Core Communications, Inc. (“Core”) for lack of jurisdiction.  The Pennsylvania Commission had resolved AT&T and Core’s dispute by applying the FCC’s capped minutes of use rate established in the ISP Remand Order, and AT&T appealed to the District Court, claiming that states are preempted by federal rules and lack jurisdiction to resolve intercarrier compensation disputes between CLECs without an interconnection agreement.  A similar case was addressed by the California Public Utilities Commission in a dispute between AT&T and Pac-West, at which time the FCC stated that the ISP Remand Order applies to CLEC-CLEC dial-up ISP-bound traffic, but the FCC refrained from addressing whether a state commission would have jurisdiction to resolve the dispute by applying federal law. 
 
Staff’s comments will support the Pennsylvania Commission’s request for resolution of the issues, support the Pennsylvania’s claim that states have the authority to adjudicate these issues under its current regulatory power, and further ask the FCC to confirm that state commissions have always had this authority. 
 
Shasta County Telecom’s Granted $2,238,806 in CASF Funding (Item 2, adopted on consent) – This Resolution approves $2,238,806 in CASF funding to Shasta County Telecom, Inc. (“Shasta”) for its Shasta County Unserved and Underserved Broadband Project (“Shasta Project”).  This funding amount represents 60% of the total project cost of $3,731,344.  The Shasta Project will extend high-speed Internet service to an estimated 331 square miles covering north of Bella Vista, Round Mountain, Montgomery Creek, and the Lake Margaret areas of Shasta County.  It is estimated that the Shasta Project will reach 1,444 households, of which 1,412 households are currently underserved.  At project completion, it is anticipated that 1,444 households will have broadband availabilities at advertised speeds of 20 Mbps down/10 Mbps up.  
 
The project area is currently unserved by wireline technology and underserved by fixed wireless and mobile broadband.  Shasta estimates that 500 households within the project area do not currently have telephone services.  Shasta proposes to provide fixed wireless broadband and telephone services by installing fixed wireless transmitters and infrastructure on three mountain tops in Shasta County: Bear Mountain, Hatch Mountain, and Round Mountain.  These installations will provide high-speed Internet service over a 331 square mile area.  Shasta will also plan on obtaining backhaul capabilities from Level 3 Communications and the telephone central office, connection to the PSTN, and Emergency 911 network will be located in an offsite co-location facility in San Diego, California.
 
A copy of the Final Resolution underlying this item is available at the following link:  
 
Race Telecommunications Granted $4,650,593 in CASF Funding (Item 15, approved on consent) – This Resolution approves $4,650,593 in CASF funding to Race Telecommunications Inc. (“Race”) for its Mono County Four Areas Underserved Broadband Project (“Mono County Project”).  This funding represents a $3,917,939 grant award, which represents 60% of the total project cost of $6,529,904.  The funding also represents a Contribution In Aid of Construction (“CIAC”) amount of $732,655.  The CIAC amount is intended to fund any federal and/or state income taxes that may apply on the CASF grant award.  If the CASF grant is not taxed, Race will not receive the CIAC amount.  Race will be funding $2,611,959 of the project cost.
 
It is expected that this project will extend high-speed internet service to 2.8 square miles covering Aspen Springs, Chalfant, Crowley Lake, and Sunny Slopes in Mono County.  Race will build the network by deploying long haul fiber from Digital 395 to the local region and then establish a regional central office and collocation facility.  Race will subsequently build a regional backbone to establish a fiber ring. 
 
This Resolution concludes that funding is appropriate because the proposed speed offering complies with the benchmark set by the Commission, the proposed service area is determined to be underserved and covers 2.8 square miles, the matching funds will come from Race’s capital budget; Race has committed to a pricing plan of two years; and the project is anticipated to be completed within 18 months.
 
A copy of the Final Resolution underlying this item is available at the following link
 
Transfer of Control of Conterra Wireless to CUB Parent Approved (Item 27, approved on consent) –This Decision grants the application Conterra Wireless Broadband, LLC (“Conterra”), Conterra Ultra Broadband Holdings, Inc. (“Conterra Holdings”), and CUB Parent, Inc. (“CUB Parent”), for approval of a transaction that will result in the transfer of control of Conterra and Conterra Holdings to CUB Parent under Public Utilities Code Section 854.
 
Conterra was authorized by the Commission to provided limited facilities-based local exchange telecommunications services as a competitive local exchange carrier in the service territories of AT&T, Verizon, SureWest, and Frontier.  Conterra is a wholly-owned subsidiary of Conterra Ultra Broadband, LLC, and an indirect subsidiary of Conterra Holdings.  CUB Parent was formed for the purposes of consummating this transaction and to acquire control of Conterra Holdings and Conterra.  In addition, CSC Cub Holdings, LLC was also formed by Court Square Capital Partners (“Court Square”) for the sole purpose of holding Court Square’s investments in CUB Parent. 
 
The Decision concludes that the transfer in control only results in a change of the ultimate indirect ownership of Conterra, and no assignment of certificates, assets, or customers will occur.  The Decision also finds CUB Parent meets the technical, environmental, and financial requirements necessary to qualify as a limited facilities-based and resale provider of local exchange and interexchange telecommunications services within California.
 
A copy of the Final Resolution underlying this item is available at the following link:  
 
HELD ITEMS
 
Proposed Amendments to Franchise Renewal Provisions of DIVCA (Item 40, held) – This 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 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 nonappeable court order.  Accordingly, the 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 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 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 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 nonappealable court order. 
 
The 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 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 nonappeable court order issued pursuant to the California video franchise law, the Decision would require applicants to attest that no such violations are occurring or are alleged to be occurring.  If a violation has been found, the applicant must submit an order or ruling showing that the violations have been cured. 
 
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 the issuance of 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
 
Proposed Decisions Addressing Presiding Officer’s Decision Imposing $19 Million Fine on Telseven(Items 39 and 39a, held until 8/14/14) – This Modified Presiding Officer’s Decision (“Modified POD”) addresses a Presiding Officer’s Decision (“POD”) that was issued in December 2013 that found that Telseven LLC (“Telseven”), Calling 10 LLC dba California Calling 10 (“Calling 10”), and Patrick Hines were responsible for unauthorized charges to California consumers.  The Presiding Officer’s Decision issued a $19,760,000 fine for the violations. 
 
An appeal of the POD was submitted by Patrick Hines, and the Modified POD addresses the appeal.  Based on the appeal, the Modified POD only finds TelSeven and Calling 10 responsible for the unauthorized charges.  The Modified POD would not hold Mr. Hines jointly and severally liable for the Commission’s $17,760,000 fine. 
 
A “Decision Different” was subsequently issued by Commissioner Sandoval, and would be consistent with the initial POD.  Specifically the “Decision Different” differs from the Modified POD because it would impose $19,760,000 fine, jointly and severally, against Telseven, Calling 10, and Patrick Hines, as an individual.  The $19,760,000 fine would be divided equally between the corporate respondents and Mr. Hines.  The “Decision Different” would conclude 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 would conclude that Mr. Hines is the alter ego of Telseven and Calling 10 for the purposes of this proceeding, and therefore it would be appropriate to assess the fine against 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:   
 
COMMISSIONER REPORTS
 
Commission Picker gave a preview of the overarching safety policy that he is currently preparing and plans on presenting at the next Commission meeting.  Specifically, he intends on articulating a safety policy by identifying a mission statement that will drive Commission’s work processes and provide insight on the Commission’s oversight obligation.  He then provided a general overview of the safety policy he is preparing, which will have a “big hairy audacious goal,” a vision of zero deaths going forward.  The safety policy will also delegate two tasks to the staff.  First, staff will be asked to identify and recommend a safety management system, whether it is one based on a the principle of increased disclosure or grounded in audit and compliance.  After a plan is adopted, the safety policy would ask the staff to develop an organizational plan on how to incrementally move forward within six months.  
 
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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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