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On March 12, 2015, the Commission held its regularly scheduled meeting.  On the regular agenda, the Commissioners discussed the appropriate metrics for reporting on timeframes for resolving Commission proceedings to the Legislature and the public.  On the consent agenda, the Commission authorized the Staff to submit comments in support of the FCC’s proposals to expand certain provisions of its 911 regulations to IP and IP-enabled service providers.  These and other items of interest are discussed in further detail below.

REGULAR AGENDA

Extension of Statutory Deadlines (Items 19 and 20, approved on consent) – Although these statutory deadline extension decisions are typically addressed on the Consent Agenda, President Picker indicated that he wanted to discuss these items as a vehicle to address the metrics and standards by which the Commission measures its compliance with statutory deadlines for completing proceedings.  He explained that the Legislature was very explicit that it had received documentation from the Commission indicating that it is consistently meeting the statutorily deadlines, but that additional information that reflects the actual amount of time that the Commission takes to resolve proceedings is unsatisfactory.  He noted that the Legislature is very unhappy with the Commission’s ability to meet the Legislature’s expectations as to what is an appropriate amount of time to resolve proceedings.  President Picker expressed specific concerns with the Commission’s practice of saying it is meeting statutory requirements, which is generally inferred by the Legislature that the Commission is meeting the 1-year or 18-month statutory deadlines.  He explained that the Commission’s statements that it is regularly in compliance with statutory deadlines is seen as being unclear or dishonest about what the Commission’s actual progress is.  He also noted that by representing that the Commission is regularly completing proceedings in a certain timeframe, that the representations could also hurt the Commission’s requests for additional resources to staff the Administrative Law Judge Division.  He followed up on these comments by asking what the legal consequences would be if the Commission simply did not extend the statutory deadlines for certain proceedings, and whether it would affect the enforceability of any decisions or requirements resulting from the proceedings.

Commissioner Florio agreed that the way the Commission reports its compliance with the statutory deadlines does “feel a little dishonest.”  He noted that the statute and the Legislature recognizes that it may take additional time to complete proceedings, and emphasized that there are usually good reasons and justifications for why a deadline cannot be met.  He also agreed that it was “self-defeating” to continuously state that the Commission is meeting the statutory deadlines, and the Commission should straightforwardly acknowledge that timeframes cannot be met, which would lend credibility to the Commission’s request for additional resources.

Commissioner Peterman expressed concern about the Commission’s ability to justify additional resources if it continued to state that it is always meeting statutory deadlines.  She also suggested that the Commission work on revising the Legislature’s expectations on how long things take, explaining that the California Commission is tackling new issues and addressing policies that have not been taken on anywhere in the country.

Commissioner Sandoval agreed that better explanations as to why extensions are needed would be helpful.  She also emphasized that it is up to the parties to engage in settlement talks, which are separate and independent from the Commission’s processes.

Commissioner Randolph explained that this is an issue of transparency and clarity.  She emphasized the need to be straightforward with the Legislature and the public, and suggested that these extension orders include statistics that will make it very clear what the Commission’s workload issues are, which would ensure that there is a better ability to assess the Commission’s needs.

CONSENT AGENDA

Staff Authorized to Submit Comments Supporting the FCC’s Proposals to Modify Federal 911 Regulations (Item 28, approved on consent) – This item authorizes the Staff to submit comments to the Federal Communications Commission (“FCC”) on behalf of the Commission on the FCC’s proposal to adopt of a uniform national approach to Internet Protocol (“IP”) 911 services.  The goal of the FCC’s proposal is to ensure that the quality and reliability of 911 services are not negatively impacted by the introduction of IP-enabled services.

Specifically, the comments would support the FCC’s proposals to: (1) expand the FCC’s regulation to make all entities provisioning any part of the 911 network to be responsible for ensuring the reliability of the function that the entity is providing; (2) expand the FCC’s regulations to require all covered 911 service providers to take reasonable measures to provide reliable 911 service, including circuit diversity, central-office backup power, and diverse network monitoring; (3) expand certification requirements to indicate whether a service provider’s IP-based 911 architecture is geographically distributed, load-balanced, and capable of automatic reroutes to backup equipment in the event of a hardware, network, software or database failure; (4) extend the annual certification to include a certification that the provider has a place in process to notify public safety answering points of an outage within specified timeframes; (5) make originating service providers, ILECs, and/or system service providers providing 911 network services directly to public safety answering points should be responsible for notification of major changes, including major changes by their subcontractors and other affiliated entities, that might affect 911 connectivity; and (6) establish rules to ensure reliability and accountability of new IP-based 911 capabilities and services, and require new entrants to certify that they are aware of, and will comply with, FCC regulations and requirements

A copy of the Staff Memorandum underlying this item is available at the following link.

A copy of the NPRM is available at the following link.

Annual User Fee Set for DIVCA Franchise Holders (Item 13, approved on consent) –This Resolution sets the annual fee for the Fiscal Year (“FY”) 2014-2015 to be paid by each video franchise holder at $0.016858 cents per dollar of gross video revenue in order to generate $950,000 as authorized in the Commission’s FY 2014-15 DIVCA-related budget.  The Commission began accepting video franchising applications in 2007, and, at the end of 2014, the Commission had issued 47 video franchises and 147 amendments.

Since the annual fee of any individual video franchise holder is based on each holder’s gross video revenue, the annual fee cannot be disclosed without revealing this information, which is competitively-sensitive and not subject to public disclosure.  Therefore, a confidential fee statement will be issued to each franchise holder following the adoption of this Resolution.  Video franchise holders with franchises issued on or before June 30, 2015 will be required to pay the annual fee before April 30, 2015.  Holders of franchises granted after this Resolution is approved shall pay the fee amount within the 60 days of their franchise or by June 30, 2015, whichever is earlier.

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

HELD ITEMS

Draft Resolution Directing Verizon Wireless to Pay $11,521,595 for Unpaid Public Purpose Surcharges and User Fees (Item 11, held by staff) – This Draft Resolution would adopt a proposal by Verizon Wireless, Inc. LLC (“Verizon Wireless”) to resolve past unpaid public purpose program surcharges and user fees owed from the sale of prepaid wireless services prior to February 2012.  Verizon Wireless proposes a total payment of $11,521,595.  Of the proposed payment amount, $10,545,989 represents the full amount of all surcharges and user fees owed prior to February 2012 and $975,606 represents the interest on the amounts owed for the unpaid surcharges and user fees.

The Resolution explains that in 2008, the Utility Audit, Finance, and Compliance Branch (“UAFCB”) of the Commission’s Division of Water and Audits issued an audit report finding that Verizon Wireless had not paid surcharges and user fees on revenues collected from prepaid wireless services.  Verizon Wireless subsequently disputed this audit finding, arguing that prepaid wireless services were not taxable.  The UAFCB disagreed with Verizon Wireless, and asserted that all communication services are subject to the surcharge.  Shortly following these events, the Communications Director issued a letter citing the UAFCB report and requested that Verizon Wireless remit $386,685 for underpayments of surcharges, and applicable interest.  The Communications Division followed up on its request for payment twice.  In May 2009, Verizon Wireless remitted $44,957 in unpaid surcharges, stating that the amount represented payment for a portion of the surcharges in which Verizon Wireless conceded that it owed.  Verizon Wireless continued to refuse to pay the unpaid surcharges for its prepaid wireless services, which it contended were exempt from surcharges.  Verizon Wireless further requested that the Commission open a proceeding to resolve the dispute.  The Commission declined this request, and then focused on a review of TracFone Wireless, Inc. (“TracFone”), another prepaid wireless provider.  The Commission subsequently opened an Order Instituting Investigation into TracFone, resulting in decision in 2012 affirming that TracFone was obligated to collect and remit surcharges and user fees for intrastate revenues.

Following the TracFone decision, Verizon Wireless initiated meetings with the Communications Division to discuss ways to determine the amount owed to the Commission and to resolve the outstanding obligation for owed surcharges and user fees prior to February 2012.  Verizon Wireless had begun to pay surcharges and user fees beginning February 2012.  After reviewing its records, Verizon Wireless determined that it could identify revenue information going back to August 2005 showing intrastate revenues from prepaid wireless services totaling approximately $365 million.  The staff concluded that Verizon Wireless made a good faith effort to determine its revenues, and subsequently applied the associated public purpose surcharge and user fee rates in effect over that period, totaling $9,974,691 for unpaid surcharges and $571,298 for unpaid user fees.  In addition, the proposed payment amount would also include an interest assessment in the amount of $975,606.

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

TracFone’s Request for ETC Designation (Item 12, held by staff) – This Resolution would conditionally grant the request of TracFone Wireless, Inc. dba SafeLink Wireless (“TracFone”) to be designated as a Eligible Telecommunications Carrier and a California LifeLine Provider throughout California, excluding Tribal Lands.

TracFone first sought ETC designation in 2008, but its initial request was denied on the grounds that it would not be in the public interest since TracFone refused to collect and remit public purpose surcharges.  The Commission’s investigation into TracFone’s practices was subsequently resolved in January 2014, when the Commission approved a decision fining TracFone $24 million.  Although TracFone filed an application for rehearing of the decision, it has since remitted payment for the fine and is currently in good standing as to all payments for user fees and public purpose program surcharges.

The Draft Resolution would approve three wireless service plans that provide a free or discounted handset and no cost activation fee: (1) a no charge unlimited minutes and texts plan; (2) a $27.60 plan with unlimited minutes and texts, and 2.5 GB data at 4G speed; and (3) a $17.60 plan with unlimited minutes and texts, and 1 GB data at 4G speeds.

The Draft Resolution would further direct TracFone to: (1) comply with all applicable state and consumer protection and service quality standard requirements; (2) submit all federal and state required annual compliance reports; (3) provide marketing materials to the CPUC for review prior to distribution and publication; (4) comply with CPUC User Fee and public purpose program surcharge requirements; and (5) submit its certificate of approval from USAC to the Communications Division Director.

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

WITHDRAWN ITEMS

Proposed Decision Denying Bright Fiber Network’s CPCN Application Withdrawn (Item 27, withdrawn) – This Proposed Decision would have denied Bright Fiber Network’s (“Bright Fiber”) request for CPCN authority in the service territories of Pacific Bell Telephone Company d/a/a AT&T California and Verizon California Inc.  In Bright Fiber’s initial application, Bright Fiber explained that it was seeking a CASF grant to provide broadband service and that it would not initially provide any local exchange, access, or any voice services.  Bright Fiber further explained that as soon as it had a sufficient customer base and the necessary voice switch and interconnection capabilities, it would provide such voice services.  Pursuant to the CASF rules in effect when Bright Fiber submitted its application, Bright Fiber was required to obtain a CPCN before seeking a CASF grant.

The Proposed Decision would have denied Bright Fiber’s request on the grounds that Bright Fiber would only provide broadband service, and that it would not be providing any local exchange voice, access, or any voice services.  The Proposed Decision would have directed Bright Fiber to file another application when it was prepared to provide voice services.

The Proposed Decision explained that since the Commission does not exercise regulatory jurisdiction or control over IP or IP-enabled services, and because Bright Fiber did not definitively intend to become a telephone company, the application did not conform to the Commission’s rules for CPCN certification.  Further, the Proposed Decision noted that Bright Fiber submitted its application in order to become eligible for CASF grant, but that the CASF program rules have since been modified to allow non-CPCN entities to qualify for CASF grants.

On the same day that this Proposed Decision was issued, Commissioner Sandoval issued an Alternate, which would grant Bright Fiber’s request for CPCN authority to provide limited facilities-based local exchange and access services in Pacific Bell’s and Verizon’s territory, as well as interexchange services in California.  Although the Alternate was not identified on the agenda for this Commission meeting, we assume that this Alternate is the reason that the Proposed Decision was withdrawn.  The Alternate explains that although Bright Fiber did not intend to provide local exchange voice, access, or other voice services immediately, that it anticipated providing voice services in the future.  The Alternate further notes that there is “no question that the facilities it plans to deploy will support such service.”

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

A copy of Commissioner Sandoval’s Alternate is available at the following link.

PUBLIC SESSION

During the public session, numerous public speakers offered comments on the proposed merger between Comcast and Time Warner.  Approximately 50 speakers were present, and these speakers were closely divided between those who supported the merger and those that opposed the merger.  The majority of those speakers who spoke out in support of the merger were non-profits, local organizations, and other community organizations that have partnerships with Comcast.  The speakers who spoke out against the merger included individual consumers and representatives of different institutions.

COMMISSIONER REPORTS

President Picker announced that Arocles Aguilar has been selected as the Commission’s General Counsel.

During her report, Commissioner Peterman publically responded to statements that were made at the Senate’s Committee on Energy, Utilities and Communications Oversight Hearing on Ex Parte Communications held on March 11, 2015.  Specifically, she addressed comments suggesting that certain parties in the Comcast/Time Warner proceeding had unique access to the Commissioners and/or were being favored in setting up ex parte meetings.  Commissioner Peterman clarified that no parties in the proceeding were favored, and that her office has made efforts at ensuring that all parties had equal access to her office.

Commissioner Sandoval expanded on Commissioner Peterman’s comments.  She explained that she believed that the basis for the statements made at the Oversight Hearing were in reference to statements made by one of the parties at the Comcast/Time Warner all-party meeting, who had “expressed the desire to negotiate the conditions.”  Commissioner Sandoval clarified that this party was mistaken because the Commission’s processes only allowed for an opportunity to comment, and that there were no improper ex parte communications occurring.

Commission Sandoval reported that she was a speaker at an event in Sacramento where she addressed a number of members of the Legislature on the California LifeLine program.  She thanked the Commission, the Communications Division, and her advisor Bill Johnston for their dedicated work and oversight.  She highlighted that the Commission has continued to enroll large amounts of people, but that there continue to be a lot of unmet needs.  She reported that she attended a conference on telecommunications issues, where there were fascinating discussions about the use of telecommunications technology in a variety of fields and industries.  She also noted that she attended the CENIC conference held in Irvine.  She explained that CENIC is a corporation that provides connectivity to universities, community colleges, and K-12 schools, and that they discussed opportunities to leverage existing resources to create connections for communities.

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If you have any questions about the above items or the underlying proceedings in which they arose, please do not hesitate to contact us.

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