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On May 21, 2015, the Commission held its regularly-scheduled agenda meeting.  There were no telecommunications items addressed on the regular agenda, but on the consent agenda, the Commission approved a Resolution ordering Verizon Wireless to pay $11.5 million for unpaid public purpose surcharges and user fees from the sale of prepaid wireless services prior to February 2012.  Separately, the Commission also approved a Resolution granting Cricket’s request to relinquish its Federal-only ETC designation.  In addition, the Commission also held the Proposed Decision that would eliminate CTF discounts for voice services, and issued another hold on the Proposed Decision and Alternate on the Comcast/Time Warner merger proceeding.  These and other items of interest are discussed in further detail below.

CONSENT AGENDA

Verizon Wireless to Pay $11,521,595 for Unpaid Public Purpose Surcharges and User Fees (Item 3, approved on consent) – This Resolution adopts 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 will pay a total payment of $11,521,595.  Of the 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 payment amount would also include an interest assessment in the amount of $975,606.

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

Resolution Granting Cricket’s Request to Relinquish ETC Status (Item 12, approved on consent) – This Resolution grants Cricket Communications, LLC’s (“Cricket”) request to relinquish its Lifeline-only Eligible Telecommunications Carrier (“ETC”) designation in California, effective September 15, 2015.  Cricket was granted a Wireless Identification Registration (“WIR”) allowing it to provide facilities-based wireless intrastate telecommunications service in California on May 4, 2001.  Cricket was subsequently granted ETC designation on December 2, 2010.

The Resolution concludes that Cricket satisfies each of the requirements to relinquish its designation, including: (1) its service area is served by another ETC; (2) it is providing advance notice to the Commission of its request; and (3) Cricket has ensured that customers in its service area will continue to be served by another ETC.

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

Decision Eliminating AT&T’s Annual Requirement to File 900/976 Blocking Compliance Report  (Item 18, approved on consent) – This Decision grants Pacific Bell Telephone Company dba AT&T California’s (“AT&T California”) petition to modify Decision (D.) 91-04-065, the decision that addressed the issue of cost recovery by AT&T California and GTE California (“GTEC”) of the historical and ongoing costs associated with 900 and 976 call blocking.  D.91-04-065 required AT&T California and GTEC to file annual reports monitoring these costs and revenues to track the telephone companies’ progress towards recovery of historical blocking costs.

AT&T explained in its petition that it discontinued its 900/976 services and the related recovery surcharge two years prior to filing the petition and that in prior reports, it had informed the Commission that its historical blocking costs would take over 10,000 years to recover and would effectively never be recovered.

The Decision explains that since the purpose of the annual report is to monitor when cost recovery has been achieved, and since it will never occur, then it is reasonable to grant AT&T California’s petition.

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

TURN Awarded $236,685.38 in Intervenor Compensation for Contributions in the CHCF-B Proceeding (Item 29, approved on consent) – This Decision grants The Utility Reform Network (“TURN”) $236,685.38 in intervenor compensation for its contributions to multiple decisions in the CHCF-B proceeding, Rulemaking (R.) 09-06-019.  This amount represents an 8.48% reduction from TURN’s original claim.  The Decisions address the Commission’s efforts to revise the CHCF-B, to devise different market mechanisms to encourage competition in high cost areas, and adopts a mechanism to update methodologies to calculate cost support amounts for the CHCF-B.

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 are reasonable and commensurate with the work performed.  The Decision directs the Commission’s Fiscal Office to disburse the awarded compensation within 30 days.

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

Consumer Federation of California Awarded $30,905.50 in Intervenor Compensation (Item 30, approved on consent) – This Decision grants $30,905.50 in intervenor compensation to Consumer Federation of California (“CFC”) for its contribution to D.14-01-035, a decision that declined to initiate a rulemaking in response to a petition filed by CFC and other consumer groups to extend privacy rules to wireless phone providers.  The Decision explains that although D.14-01-035 denied the petition, it also directed the Commission to continue to monitor the issues raised in the petition and to initiate a rulemaking in the future if necessary.

The Decision explains that the requested hourly rates for CFC’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 are reasonable and commensurate with the work performed.

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

Greenlining Granted $34,280.30 in Intervenor Compensation for Contributions to LifeLine Proceeding (Item 31, approved on consent) – This Decision grants $34,280.30 in intervenor compensation to The Greenlining Institute (“Greenlining”) for its contributions to Decision (D.) 14-01-036 issued in the LifeLine proceeding.  D.14-01-036 adopted revisions to the LifeLine program and extended the program to wireless service providers.  The Decision reduces Greenlining’s original request by 2.06% to correct for mathematical errors and disallowances for clerical work that is not compensated by the Commission.

The Decision explains that the requested hourly rates for Greenlining’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 are reasonable and commensurate with the work performed.

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

HELD ITEMS

Proposed Decision on Modifications to the CTF Program (Item 16, held) – This Proposed Decision would resolve Phases 1 and 2 issues regarding the California Teleconnect Fund (“CTF”) and would adopt restated program goals and modifications to the CTF program.  The restated goals would effectively modify the program into a direct Internet access program.  Specifically the proposed restated goals would be as follows: (1) advance universal service by providing discounted rates to qualifying schools, maintaining pre-school, kindergarten or any of the grades 1 to 12, inclusive, community colleges, libraries, hospitals, health clinics and community organizations; (2) bring every Californian direct access to advanced communications services in their local communities; (3) ensure high-speed internet connectivity for community CTF-eligible institutions at reasonable rates; and (4) increase direct access to high-speed internet in communities with lower rates of internet adoption and greater financial need.

The Proposed Decision would also modify the CTF program by eliminating CTF discounts for voice services, a proposal that was heavily opposed by many parties in the proceeding.  The Proposed Decision would also establish a group of categorically eligible participants for certain schools, community colleges, libraries, hospitals and health clinics.  In addition, the Proposed Decision would revise the eligibility criteria for community base organizations, including: (1) limiting CBO eligibility to those entities with revenues less than $5 million (from $50 million); (2) requiring a qualifying CBO to provide a qualifying service in a manner that constitutes 50% or more of a CBO’s mission; (3) requiring CBOs to provide services directly to individuals at specific geographic locations; (4) requiring a majority of members of the Board of Director to be members of the community the organization serves; and (5) eliminate discounts for purely administrative purposes.

For additional details regarding the proposed rules, please Appendix A of the Proposed Decision.

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

Proposed Decision and Alternate on the Comcast/Time Warner Merger  (Items 38 and 38a, held) – 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.

An Alternate was issued by Commissioner Florio, which would deny the merger based on the finding that the merger would not be in the public interest that could not be mitigated by conditions, as suggested by the Proposed Decision.

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

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

Proposed Decision Regarding Deferral of Infrastructure Network Study of AT&T and Verizon  (Item 14, held) – This Proposed Decision would defer the examination of the networks of AT&T California and Verizon California Inc. ordered in Decision (D.) 13-03-023 until the Commission rules on the proposed service quality rule changes and penalties under consideration in the Service Quality Proceeding, Rulemaking (R.) 11-12-001.  The Proposed Decision explains that penalty mechanisms being contemplated in the Service Quality, if adopted, would provide significant incentives for telephone corporations to improve service quality to a level that meets the Commission’s General Order 133-C minimum service quality measure standards.  For these reasons, the Proposed Decision would determine that the network study may not be necessary.

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

TracFone’s Request for ETC Designation (Item 3) – 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.

Dial World Communications’ CPCN Application (Item 17, held) – This Proposed Decision would approve a settlement agreement that grants Dial World Communications, LLC’s (“Dial World”) request for a certificate of public convenience and necessity (“CPCN”) for authority to provide resold interexchange service in California.

Dial World is a prepaid debit card provider offering telecommunications services and intends to provide service via prepaid debit/calling cards to consumers in California.  On May 31, 2013, the Communications Division was advised that Dial World had been offering telecommunications services as a prepaid debit card provider to California consumers without proper authority.  The Communications Division therefore directed Dial World to apply for a CPCN.  Dial World subsequently submitted this application, which acknowledges that it has been providing prepaid calling services in California without authorization.  Dial World’s application was protested by the Commission’s Safety and Enforcement Division for operating as an unlicensed carrier and raised questions about Dial World’s fitness to operate in California and to comply with the Commission’s rules.

Pursuant to the terms of the Settlement Agreement, Dial World would acknowledge that it previously failed to obtain the required authority to operate in California and that it had begun providing the services of prepaid calling cards in California prior to obtaining authority.  Dial World would also agree to pay a penalty of $65,000 for its violations.  The Proposed Decision would conclude that the Settlement Agreement is in the public interest, reasonable in light of the record, and consistent with law.  Further, the Proposed Decision would conclude that Dial World meets the necessary financial, technical, and environmental qualifications necessary to hold a CPCN.

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

COMMISSIONER REPORTS

Commissioner Peterman announced that her telecom advisor, Niki Bawa, will be taking a temporary leave of absence from the Commission in order to pursue a Masters of Law degree in Communications at UC Berkeley.  Mr. Bawa will be replaced by John Reynolds who joined the Commission in 2012 as counsel for ORA and the Safety and Enforcement Division.

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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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