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On March 26, 2015, the Commission held its regularly-scheduled agenda meeting.  During Management Reports, Ms. Mickiewicz, the Assistant General Counsel of the CPUC gave a report on the FCC’s Net Neutrality Order.  On the consent agenda, the Commission increased the CTF surcharge rate from 0.93% to 1.08% effective June 1, 2015.  In addition, the Commission held the Proposed Decision that would approve the proposed merger of Comcast and Time Warner, as well as the Proposed Decision that would deny Google Fiber’s request to expand the pole attachment and rights-of-way rights to Video Service Providers.  These and other items of interest are described in further detail below.

REPORT ON THE FCC’S NET NEUTRALITY ORDER 

Helen Mickiewicz, the Assistant General Counsel gave a report on the FCC’s recent Net Neutrality Order.  Ms. Mickiewicz explained that overarching objectives of the FCC’s Net Neutrality Order included the need address America’s need for more and better broadband and to open broadband networks.  She observed that the FCC Order emphasized that the record clearly demonstrated that providers of broadband internet services had incentives to act as gatekeepers and to discriminate, block, and offer preferential treatment to those who pay more.  To address these concerns, she explained that the FCC reclassified the service under Title II of the Communications Act.

She briefly summarized some of the major rules that were adopted, including the prohibition on blocking, throttling and degradation, and paid prioritization.  She also explained that each of these prohibitions could be waived on a case-by-case basis if the provider could demonstrate that it would not be harmful to the public, but that the starting point was a prohibition for all providers.  She also clarified that these rules would apply to both mobile and fixed broadband.
Ms. Mickiewicz then explained that the Net Neutrality Order adopted numerous forbearance provisions, similar to the model adopted for CMRS providers.  Specifically, the following provisions would not be applied to providers of broadband internet services: (1) unbundling of last mile facilities; (2) tariffing requirement; (3) rate regulation; and (4) cost accounting rules.  However, the FCC clarified that it would not forbear from provisions regarding: (1) interconnection requirements; (2) rules regarding just and reasonable rates; (3) customer privacy provisions; (4) enforcement provisions and the ability for consumers and state commissioners to file complaints; (5) access to utility poles, ducts, and rights of way; (6) universal service provisions; and (7) requirements regarding the provision of relay service.

Ms. Mickiewicz further explained that the Order affirms the longstanding conclusion that broadband internet access service is a jurisdictionally interstate service that is beyond the reach of the state, and that the states are preempted from imposing any regulations from which the FCC is forbearing.

CONSENT AGENDA
 
CTF Surcharge Rate Increases from 0.93% to 1.08% Effective June 1, 2015 (Item 14, approved on consent) – This Resolution approves the California Teleconnect Fund (“CTF”) surcharge rate increase from 0.93% to 1.08% effective June 1, 2015.  This is the second increase to the CTF surcharge in the last six months, which was last increased on October 1, 2014 from 0.59% to 0.93%.  The Resolution explains that the surcharge increase is necessary to meet budgeted program expenses for FY 2015-16 budget of $148.087 million, which had increased by approximately $40 million from the FY 2014-15 budget.  The Resolution explains in order for the program to meet the budgeted program expenses, it is necessary to increase the CTF surcharge. The Resolution also explains that the significant CTF budget increase is primarily attributed to the education initiatives included in the State Budget for FY 2014-15 and recent changes in the federal E-rate program.

All telephone corporations and interconnected VoIP service providers must assess a CTF surcharge rate of 1.08% on revenues collected from end users for intrastate telecommunications services subject to surcharge beginning on June 1, 2015

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

Verizon Wireless Authorized to Install Overhead Facilities Along a Scenic Highway (Item 15, approved on consent) – This Resolution grants the request of Cellco Partners dba Verizon Wireless (“Verizon Wireless”) to deviate from Public Utilities Code Section 320 to install three wireless antennas on an existing pole on Saratoga-Los Gatos Road in Santa Clara County.  Section 320 requires the undergrounding of all future electric and communication distribution facilities that are proposed to be erected in proximity to any designated state scenic facilities.

This Resolution concludes that Verizon Wireless’s request to deviate from Section 320 is reasonable.  Specifically, the Resolution explains that deviation is appropriate because: (1) wireless antennas cannot be placed underground; (2) the project area is considered an “urban service area” and is not adjacent to any open space reserve, park, or other public lands; (3) the portion of the scenic highway already includes existing poles and power lines; and (4) Verizon’s Wireless’s efforts to blend in the facilities would minimize the project’s visibility and would not significantly alter the visual impact of the scenic highway.

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

Cost of Living Adjustment Denied for Intervenor Compensation (Item 17, approved on consent) – This Decision declines to adopt a cost-of-living adjustment (“COLA”) for intervenor fees to be performed in the 2015 calendar year.  The Decision explains that the Commission relies on a specific formula to calculate the COLA, which utilizes indices of the Consumer Price Index, the Consumer Price Index for Urban Wage Earners and Clerical Workers, and the Employment Cost Index for civilian workers, private workers, and government workers.  Using that formula, the Decision explains would result in a negative COLA of 0.452%.  Accordingly, the Decision concludes it would not be appropriate to adjust the COLA for the 2015 calendar year.  However, the Decision explains that the Commission intends to adopt a COLA for the 2016 calendar year, which will be based on economic changes from the first quarter of 2015 to the first quarter of 2016.

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

City of Huntington Beach and Next G’s Settlement Agreement Approved (Item 22, approved on consent) – This Decision adopts a settlement agreement between Crown Castle NG West, LLC formerly known as NextG Networks of California Inc. (“Crown Castle” or “NextG”) and the City of Huntington Beach (“Huntington Beach”), which resolves a long-standing dispute that began in 2007 regarding the installation of Distributed Antenna System (“DAS”) network in the public right-of-way of Huntington Beach.  This Decision specifically resolves two consolidated Commission proceedings, an application submitted by Crown Castle to install a DAS network and a complaint filed by Huntington Beach challenging the project approval.  The DAS network project included the installation of fifteen nodes to be installed in the public right-of way, twelve nodes of those nodes were to be installed on existing utility pole and the other three would be installed on new poles.  Through a separate Federal court proceeding, NextG initially obtained an injunction requiring Huntington Beach to authorize the installation of several nodes.  Huntington Beach appealed the Federal injunction, and the Ninth Circuit subsequently vacated the injunction and remanded the case back to the District Court.   The District Court then granted Huntington Beach’s motion for judgment on the pleadings, but did not order the removal of the portion of the project that was already installed.  Instead, the District Court ordered NextG to apply for approval of its project, resulting in these two Commission proceedings.

The Settlement Agreement resolves all the outstanding issues of the two proceedings, and provides specific conditions surrounding the approval of both the nodes that were previously installed and those nodes that have not been installed.  The major  terms of the Settlement Agreement are as follows:  (1) three of the proposed nodes from Crown Castle’s original project are to be withdrawn; (2) seven of the nodes installed pursuant to the since-reversed Federal injunction may remain in place, subject to several conditions; (3) one of the nodes installed pursuant to the since reversed Federal injunction will have the supporting lines and cables re-routed partially undergrounded; and (4) Crown Castle is authorized to install aerial fiber optic lines to connect four of the nodes but will also need to apply for additional approval through a conditional use permit.

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

A copy of the Settlement Agreement is available at the following link.

TouchTone Granted a CPCN (Item 11, approved on consent) – This Decision grants TouchTone Communications, Inc. (“TouchTone”) a Certificate of Public Convenience and Necessity (“CPCN”) to provide resold interexchange services throughout California.  TouchTone is a New Jersey-based company that provides long-distance services.

Touchtone was granted operating authority and registration to provide resold interexchange services within California on October 2, 2014.  However, in 2012 the Commission revoked TouchTone’s operating authority, along with the licenses of another 105 carriers, for failure to post a performance bond despite repeated notices from the Communications Division.  Despite revocation of its operating authority, TouchTone continued to report and remit surcharges because it claims that it was unaware of the revocation because it had not received the notices.  The Decision notes that the Commission maintains a database with regulatory contact information for all licensed carriers, and that it is the utilities’ responsibility to ensure that its contact information is properly updated.  Nevertheless, the Decision concludes that TouchTone made a good faith effort to comply with the Commission’s requirements by continuing to file annual reports and continuing to report and remit surcharges and user fees even after its revocation.  Further, the Decision explains that TouchTone immediately consulted with staff once it became aware of the “oversight” and acted to correct its deficiencies.

This Decision concludes that TouchTone meets the environmental, technical, and financial qualifications necessary to be granted a CPCN.  Since TouchTone does not intend to pursue any proposed construction or extension of facilities, the Decision concludes that granting TouchTone a CPCN will have no adverse impact on the environment.  Further, TouchTone has provided information on its management group and has confirmed that no one associated with or employed by TouchTone was previously associated with a telecommunications carrier that filed for bankruptcy or was sanctioned by a regulatory agency, or found civilly or criminally liable.
TouchTone has also demonstrated that it has sufficient additional resources to cover all deposits required by local exchange carriers and/or interexchange carriers in order to provide interexchange services.

A copy of the Decision underlying this matter is available at the follow link.

Hunter Communications Granted a CPCN (Item 31, approved on consent) – This Decision grants Hunter Communications, Inc. (“Hunter Communications”) a Certificate of Public Convenience and Necessity (“CPCN”) to provide full facilities-based and resold competitive local exchange services in the service territories of AT&T California, Verizon California Inc., Citizens Telecommunications Company of California dba Frontier Communications California, and SureWest Communications, and interexchange services throughout California.

Hunter Communications is an Oregon-based entity that constructs and provides fiber-based dedicated network and point-to-point services, which may be utilized for transmission of both voice and data communications, as well as last-mile fiber broadband Internet access services.  Currently, Hunter serves small business, educational institutions, municipal government agencies, and healthcare and financial institutions throughout Southern Oregon.

The Decision explains that although Hunter intends to install telephone line facilities, including fiber optic cable, within existing facilities of incumbent local exchange carriers, it is appropriated to adopt an expedited review of its construction projects.  Although Hunter has not currently identified the specific sites in which it plans construction, the types of construction Hunter intends pursue are categorically exempt from CEQA.  As a result, the Decision determines that it is appropriate to grant an expedited review of Hunter’s future construction projects.

Further, the Decision concludes that Hunter meets the necessary financial and technical qualifications necessary to be granted to a CPCN.  The Decision also requires that Hunter provide an audited financial statement during each of its first three years of operation in the State of California.

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

TURN Awarded $16,797.40 in Intervenor Compensation For Contribution to the Decision Expanding the CASF Eligibility to Non-Telephone Corporations (Item 36, approved on consent) – This Decision awards The Utility Reform Network (“TURN”) $16,763.55 for their contribution to Decision (D.) 14-02-018, the Decision that revised the eligibility rules for the California Advanced Services Fund (“CASF”) program, and adopted additional safeguards for non-telephone corporations applying for CASF funding.

The Decision explains that the requested hourly rates for TURN’s representatives are comparable to market rates paid to experts and advocates having comparable training and experience and offering similar services, and that the claimed costs and expenses, as adjusted, are reasonable and commensurate with the work performed.  The intervenor awards will be paid by the Commission’s Fiscal Office out of the Commission’s Intervenor Compensation Fund.

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

The Center for Accessible Technology and Assistive Technology Law Center and Awarded Intervenor Compensation for Their Contribution to the Decision Expanding the DDTPto Include Speech Generating Devices (Items 38 and 41, approved on consent) – These Decisions grant intervenor compensation in the amount of $87,048 to the Assistive Technology Law Center (“ATLC”) and $56,247.93 to the Center for Accessible Technology (“CforAT”) for their contribution to Decision (D.) 13-12-054, the Decision that establishes two programs for the distribution of speech generating devices by the Deaf and Disabled Telecommunications Program (“DDTP”).

The Decision explains that the requested hourly rates for ATLC’s and CforAT’s representatives are comparable to market rates paid to experts and advocates having comparable training and experience and offering similar services, and that the claimed costs and expenses, as adjusted, are reasonable and commensurate with the work performed.  The intervenor awards will be paid by the Commission’s Fiscal Office out of the Commission’s Intervenor Compensation Fund.

A copy of the Decision granting intervenor compensation to CforAT is available at the following link.

A copy of the Decision granting intervenor compensation for ATLC is available at the following link.

HELD ITEMS

Proposed Decision on the Comcast/Time Warner Merger (Item 45, held until 5/7/15) – this Proposed Decision would grant the application of Comcast Corporation (“Comcast”), Time Warner Cable Inc. (“Time Warner”), Time Warner Cable Information Services (California), LLC (“TWCIS”) and Bright House Networks Information Services (California, LLC (“Bright House”) for approval of the transfer of control of TWCIS and Bright House to Comcast.  The Proposed Decision would also grant the application of Comcast, TWCIS and Charter Fiberlink CA-CCO, LLC (“Charter Fiberlink”) to transfer a limited number of business customers and associated regulated assets to Charter Fiberlink.

The Proposed Decision would grant the transfer applications subject to an extensive list of conditions intended to mitigate significant public interest concerns that would result from the proposed merger.  Specifically, the Proposed Decision would find that the anti-competitive effects of the merger would hinder broadband development in California and that Comcast’s Internet Essentials program has performed poorly in closing the digital divide in California and fulfilling universal service goals.

In order to mitigate the concerns raised by consumer groups, the Proposed Decision would impose twenty-five conditions, including the following:  (1) Comcast shall extend the Lifeline program on the same basis as Time Warner; (2) Comcast shall collect and report annually for a five year period on the merged entities efforts at meeting supplier diversity goals; (3) Comcast shall make available in multiple languages, as specified, information regarding the necessity for using backup batteries in connection with a VoIP-based telephone system in connection with power outages; (4) Comcast shall offer all of its California customers the ability to use Roku or other independent video programming platforms, on the same basis that Time Warner did, for five years; (5) Comcast shall extend its Internet Essentials program at a minimum of 10Mbs/1Mbps to at least 45% of eligible households within two years of the merger; (6) Comcast shall, within 2 years of the merger, upgrade facilities to provide minimum broadband service speeds at 10Mbs/1Mbps and within 5 years at 25Mbps/3Mbps; and (7) multiple reporting requirements to assess the status of Comcast’s compliance with the conditions.  A complete list of the proposed conditions are contained in Appendix A to the Proposed Decision.

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

Google Fiber’s Petition to Modify DIVCA Decision (Item 10, held by staff until 5/7/15 ) –  This Proposed Decision would deny the petition of Google Fiber Inc. (“Google Fiber”) to modify the DIVCA decision to provide all state-franchise video service providers (“VPSs”) with the right to access public utility infrastructure (primarily by pole attachments or conduit access) in accordance with the rates, terms, and conditions of the right of way rules adopted in D. 98-10-058.

The Proposed Decision would deny Google Fiber’s petition because the Commission lacks statutory authority under the Public Utility Code and federal law to grant VSPs the right to access public utility infrastructure.  The Proposed Decision explains that such access is afforded under statute only to cable television companies and competitive local exchange carriers.  The Proposed Decision further explains that state-franchised VSPs classified as “cable television corporations” as defined by Public Utilities Code Section 216.4 remain eligible for access to public utility rights of way.  However,  the Proposed Decision explains that VSPs that are not classified as cable television corporations as defined by statute do not have the right to access utility infrastructure.  The Proposed Decision also notes the public safety concerns related to Google Fiber’s petition, observing that the Commission lacks authority to promulgate and enforce safety regulations with respect to VSPs, which would raise significant concerns if VSPs begin installing thousands of miles of new cable facilities on utility infrastructure.

The Proposed Decision further acknowledges that the FCC recently adopted the Net Neutrality Order, which reclassified broadband Internet access service under Title II of the Communications Act.  The Proposed Decision observes that the Net Neutrality Order allows broadband network providers to access poles, ducts, conduits, and rights-of-way owned or controlled by utilities in the same manner as cable operators and telecommunications carriers under 47 U.S.C. § 224.  However, the Proposed Decision clarifies that the conclusions reached in the Proposed Decision are primarily based on California law and does not take into consideration any effects of the Net Neutrality Order.

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

Draft Resolution Directing Verizon Wireless to Pay $11,521,595 for Unpaid Public Purpose Surcharges and User Fees (Item 3, held until 5/7/15) – 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 4, held until 5/7/15) – 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’s most recent request was filed on February 3, 2014 and amended on April 1, 2014 to specifically include the Small LEC territories.  Although we initially were prepared to protest TracFone’s amended advice letter, further research confirmed that the Commission was authorized to grant wireless, LifeLine-only ETC requests for authority in the Small LEC service areas based on FCC directives.
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.

COMMISSIONER REPORTS

During Commissioner reports, Commissioner Sandoval spoke briefly about the FCC’s Net Neutrality Order, observing that the FCC quoted her five separate times on the importance of communications in the ensuring that the Commission can perform their duties in the management of electricity, water, communication, and rail issues.

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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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