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On Thursday, April 27, 2006, the CPUC held its regularly scheduled agenda meeting.  The agenda featured numerous telecommunications-related matters, including the long-awaited decision in Phase II of the access charge proceeding, and the decision establishing rules for implementation of Broadband over Power Lines.  A summary of the significant telecommunications-related items on the agenda, and their respective dispositions, is provided below:


REGULAR AND CONSENT AGENDA ITEMS 

 

  • Decision Reached in Phase II of Access Charge Proceeding (Item 51, 51a, 51a adopted 3-2) – By a 3-2 vote, the Commission adopted the Peevey alternate resolving Phase II of the proceeding to modify intrastate access charges.  This decision removes the Network Interconnection Charge (“NIC”) and Transport Interconnection Charge (“TIC”) portions of AT&T and Verizon’s access charges.  Consistent with principles of revenue neutrality, the decision permits SBC and Verizon to recover the lost revenues associated with eliminating these rate elements through the use of a surcharge on all local exchange services.  Significantly, the decision also establishes a timeline for Phase III of the proceeding, during which the Commission will consider whether to remove “non-cost-based” elements of access charges for carriers other than SBC and Verizon (including small and mid-sized ILECs, and CLECs).

 

  • Commissioner Peevey introduced both the proposed decision and his own alternate, chuckling to himself about the number of acronyms that this matter involves.  Both the proposed decision and the alternate called for elimination of the NIC and the TIC, which are elements of the large ILECs’ access charges that are considered to be “above cost.”  The alternate and the proposed decision differ chiefly as to the scope of the lost revenues that would be subject to recovery through the surcharge mechanism.  The proposed decision would limit recovery to lost revenues associated with access charges to unaffiliated carriers, whereas the alternate would permit recovery of all lost revenues.  The other difference between the drafts is that the alternate would permit companies to seek relief from the annual calculations of actual lost revenue after five years, while the proposed decision provides no such relief.

 

  • Commissioner Peevey briefly highlighted the virtues of his alternate, emphasizing the competitive nature of the long distance market, and the importance of removing non-cost-based elements from access charges.  Peevey noted that while it will be useful to rely on actual calculations of lost revenues initially, after a five year period, it will not be worthwhile to involve staff time in reviewing these calculations.  Commissioner Chong also supported the Peevey alternate, joking that “in my experience, it is very rare that you can vote for some decent policy, and eliminate two telecom acronyms at the same time.”  Chong praised the decision as another key step away from a world in which long distance rates subsidize local rates.  As Chong noted, “these NICs and TICs just don’t make any sense any more.”

 

  • Commissioners Brown and Grueneich spoke in favor of the proposed decision. Brown characterized the Peevey alternate as a “very beneficial use of a coarse brush,” since it fails to distinguish between “paper transfers” and access charges to unaffiliated carriers for the purposes of lost revenue recovery.  Commissioner Grueneich echoed these sentiments, arguing that the alternate would result in a potential windfall to the large ILECs that violates the principles of rate rebalancing, and could disadvantage unaffiliated carriers.  Grueneich also raised procedural objections, noting that the Peevey alternate does not adequately explain its rationale regarding the possibility of disadvantaging unaffiliated carriers.  In conclusion, Commissioner Brown made some interesting comments about the possible overlaps between this decision and the URF proceeding, and suggested that it might be possible to eliminate the surcharge authorized by this decision as part of the URF reforms.

Following this discussion, the Peevey alternate passed 3-2, with Grueneich and Brown dissenting.

 

  • Broadband Over Power Lines Decision Adopted (Items 47, 47a, Item 47 adopted 4-1) – By this decision, the Commission establishes some basic rules to facilitate the implementation of Broadband over Power Lines technology in California.  The decision is designed to “provide regulatory certainty” for BPL providers, consistent with the Commission’s policy of “encourag(ing) development and competition in the broadband market.”  The decision allows energy utilities to enter into contractual arrangements with third parties to provide BPL service using energy utility infrastructure.  The decision also exempts BPL projects from Section 851 approval requirements, except in situations where an actual sale of utility property is involved.  While the decision applies a set of affiliate transaction reporting requirements to transactions involving energy utility affiliates, it declines to apply the full panoply of affiliate transaction rules to such situations.  As the Assigned Commissioner, Commissioner Chong introduced this item.  Chong has proven to be a strong proponent of BPL as possibly providing the “third pipe” into the home that will help achieve California’s broadband penetration goals, and foster more robust competition in the broadband market.  Chong championed BPL in her comments, noting that it holds the promise of lower rate plans, enhanced competition, and improved energy conversation.  Chong emphasized the importance of acting swiftly and decisively to pave the way for this technology, noting that “we could wait until the world changes around us, and only then change the rules to catch up with the rest of the nation.”  Instead, she argued, the Commission should “look ahead,” and move forward with what she termed a set of “sensible, light-handed regulatory rules that will protect consumers.”  Chong observed that BPL implementation will require significant investment, and it would be unfortunate if regulation stood in the way.  At the same time, the affiliate reporting requirements and the 50/50 shareholder / ratepayer access fee sharing mechanism will help prevent BPL arrangements from disadvantaging ratepayers.  

 

  • Employing a powerpoint presentation, Commissioner Brown dissented from Chong’s remarks, emphasizing the merits of his alternate.  Brown criticized the proposed decision as a short-sighted approach that will “pick a winner” in the broadband market.  Rather than removing regulatory obstacles, Brown argued, the proposed decision “creates a subsidized participant in the broadband market in the name of certainty.”  The Brown alternate would have imposed more extensive affiliate transaction rules on BPL arrangements, and it would have implemented a more ratepayer-friendly method for splitting access fees and lease payment between ratepayers and shareholders.  The alternate would also impose a five year “use it or lose it” period on BPL providers who obtain paths to the home, under which providers would have to relinquish their rights if they are not being used.  Finally, the alternate would have capped BPL lease lengths at twenty years, and required leases extending beyond the year 2031 to undergo Section 851 review.   Commissioners Bohn and Peevey expressed firm support for the proposed decision.  Providing a voice of moderation, Bohn noted that “when you are trying to strike a balance, there will be good news and bad news.”  If at some point, the situation “smells like anticompetitive behavior,” the Commission will have the power to correct the situation, according to Bohn.  Commissioner Peevey highlighted the competitive benefits that BPL could hold in “moving beyond the current duopoly to something more than that.”  Ultimately, the proposed decision passed 4-1, with Brown as the lone dissenter.  

 

  • Commission Denies Petition for Modification of 310 Area Code Decision (Item 52, adopted 5-0) – By this decision, the Commission may have finally put an end to the saga that has become the 310 area code overlay.  After years of hang-wringing on the subject, the Commission adopted a split of the 310 area code in August 2005, in D.05-08-040.  In December 2005, the County of Los Angeles filed a petition for modification of that decision, asking once again that the Commission defer judgment on whether an area code overlay is necessary until a further number utilization study is performed.  This decision rejects that petition for modification.  Commissioner Peevey briefly introduced this item, emphasizing that the 310 area code is already at the point of exhaust, and that immediate action is necessary.  While he acknowledged that the Commission should continue to be vigilant to adopt numbering conservation measures, it is too late for the 310 area code.  Peevey inquired whether his fellow Commissioners had any comments on this “longstanding melodrama.”  They did not, and the item passed unanimous 5-0 vote.

 

  • Frontier Companies Granted Authority to Grandfather 75% Employee Discount Packages, and Replace them with 50% Employee Discount Packages, Res. T-17006 (Item 6, adopted on consent agenda) – This resolution grants the Frontier Companies’ request to discontinue its current 75% employee discount on Citizens Select Plus bundled service plans for new employees, and offer a 50% employee discount instead on a going-forward basis.

 

  • OIR to Further Examine Intervenor Compensation Procedures (Item 45, adopted on consent agenda) – By this item, the Commission is opening another Order Instituting Rulemaking to examine its intervenor compensation procedures.  This OIR would facilitate a number of changes to the intervenor compensation program, including:  codifying existing precedent regarding eligibility and compensable costs; providing intervenors with further flexibility in filing notices of intent to seek compensation; enacting accounting and documentation requirements to streamline Commission review and determination of eligibility for intervenor compensation; adopting a mechanism for providing notices of intent to seek compensation for judicial review costs.  Significantly, the OIR would also eliminate the intervenor compensation fund that is used in quasi-legislative rulemakings.  Instead, the responsibility for intervenor compensation in such proceedings would be allocated amongst all utilities with over a certain amount in annual revenue.  The OIR’s suggested threshold for this purpose is $50 million for telecommunications utilities.

 

  • Foresthill Granted Authority to Grandfather Foreign Exchange Service (Item 22, adopted on consent agenda) – By this resolution, the Commission grants authority to Foresthill Telephone Company to grandfather its “foreign exchange” service, which is currently being offered to only eleven customers.  As Foresthill noted in support of its proposal, the demand for foreign exchange service in its territory no longer justifies continuing to provide the service.

 

  • Application for Transfer of Ownership Denied, and Penalties Imposed on Applicant and Applicant’s Law Firm For Rule 1 Violations (Item 11, adopted on consent agenda) – This item provides an example of what can occur when the Commission believes a carrier is ignoring its authority.  By this application, New Century Telecom sought permission to transfer ownership of the carrier from Kathleen Helein to Karyn Bartel.  According to the decision, this transaction was already completed without Commission authorization in March 2003.  In October 2005, New Century’s CPCN was revoked due to the company’s failure to file an annual report and remit regulatory surcharges and fees.  This decision denies New Century’s application, since the company is no longer a public utility.  Citing numerous violations of the Public Utilities Code and the Commission’s Rules of Practice and Procedure, the decision imposes numerous penalties on New Century, including a $55,000 fine.  The decision also provides that New Century owes $174,255 in regulatory surcharges and fees.  Until all of these amounts are paid, New Century shall not operate as a public utility.  Interestingly, this decision also imposes a non-monetary penalty on New Century’s law firm, the Helein Law Group.  According to the decision, this firm concealed information about New Century’s alleged slamming violations in other jurisdictions, and abetted other misrepresentations to the Commission in violation of Rule 1 of the Commission’s Rules.  The decision concludes that “the firm cannot be trusted,” and that “those who rely on information provided by [the firm] should be warned.”  To warn parties of the firm’s past transgressions, the decision requires it to submit a notice with every document that it files with the Commission that it has been found guilty of a Rule 1 violation.
  • Clearlinx Granted Modification in its CPCN to Allow for Full Facilities Based Service (Item 32, adopted on consent agenda) – This decision modifies Clearlinx’s CPCN from one permitting limited facilities-based interexchange service to one allowing it to provide full facilities-based local exchange and interexchange service.  The decision outlines procedures whereby Clearlinx can obtain approval under CEQA – or seek an appropriate CEQA exemption – in connection with proposed construction projects.  

 

  • Sprint Granted Authority to Cease Offering Resale Service (Item 26, adopted on consent agenda) – This decision grants Sprint’s application to withdraw from offering resale and UNE-P service.  Due to regulatory and market changes in recent years, Sprint has concluded that it is no longer profitable to serve customers in these markets.  This decision outlines a plan for migrating existing resale customers to the underlying ILECs, and for transitioning UNE-P customers to Trinsic, Inc., or to a carrier of each customer’s choice. 

 

  • Telrite Denied Expansion of CPCN to Allow it to Provide Resold Local Exchange Services (Item 14, adopted on consent agenda) – This decision denies Telrite’s request to expand its CPCN to include resold local exchange service.  Telrite currently operates as a resold interexchange carrier, but has failed to file the proper surcharge and user fee reports.  Based on that failure, the proposed expansion of its authority is denied without prejudice to its ability to re-file once it has completed the proper documentation.  

 

  • CPCNs Revoked for Failure to Cooperate with the Commission Directives (Item 8, adopted on consent agenda) – This decision revokes the CPCNs of six carriers who failed to remit the appropriate surcharge amounts, and who failed to respond to repeated attempts by the Commission to contact them.

 

  • CA-CLEC LLC Granted Full Facilities Based Authority (Item 39, adopted on consent agenda) – This decision grants full facilities-based local exchange authority to CA-CLEC.  In particular, CA-CLEC wishes to construct certain aerial and underground projects in the City of Saratoga to reach a particular customer.  The decision also provides that the current construction projects under consideration by CA-CLEC are exempt from further CEQA review. 

LEGISLATIVE ITEMS


 

  • Wireless Permit Streamlining Legislation (Item 68, consent agenda, support 5-0) – By a 5-0 vote, the Commission voted to support SB 1627, a bill that would require a lead agency to either approve or disapprove a development project designed to support a wireless telecommunications facility within 90 days from the date that the environmental impact report is certified.  The goal of this legislation is to provide for a more streamlined process for implementing wireless broadband facilities, and it generally has the support of the wireless industry.

SIGNIFICANT HELD ITEMS

 

  • Draft Resolution Modifying Procedures Governing ETC Designation and Re-Certification, Res. T-17002 (Item 7, held by staff until 5/11 consent agenda) – This item would impose heightened reporting requirements on carriers seeking to be designated as ETCs, and also implement ongoing requirements for carriers previously qualified as ETCs.  

 

  • Proposed Decision and Alternate Resolving Policy Toward Allocation of Gains/Losses on Sale of Utility Property (Items 56, 56a, held by Brown for further review until 5/11) — This proposed decision and alternate would resolve the “gain on sale” proceeding, in which the Commission has been examining how to appropriately allocate gains and losses upon the sale of utility property.  The proposed decision would allocate 75% of such proceeds to ratepayers and 25% to shareholders, whereas the alternate would institute a 50/50 split between the two. 

 

  • Decision Granting Intervenor Compensation to TURN in Connection with Consumer Protection Proceeding (Item 5, Held by Grueneich for further review until 5/11) – This proposed decision would partially grant TURN’s request for additional intervenor compensation in connection with the consumer protection proceeding.  The request seeks compensation for time spent monitoring federal litigation in which carriers sought to overturn the original decision adopting G.O. 168, D.04-05-057.  This draft would deny large portions of TURN’s request, based on the fact that many of the costs for which compensation is sought were incurred to prepare for a motion to dismiss that was never brought, and which was rendered moot by the withdrawal of the carriers’ claims.  

 

  • Decision Offering Support for Additional “Broadband Report” to be Submitted to Legislature (Item 58, held by staff until 5/11) – This item would commit the Commission to a “support” position on SB 850, a piece of legislation that calls for the submission of yet another report to the legislature on the state of broadband access in California.  The Commission report on this legislation notes that the CPUC does not have jurisdiction over all forms of broadband providers, and recommends some minor revisions to reflect that fact.  

 

  • Net Neutrality Legislation (Item 72, held by staff until 5/11) – This bill would adopt various net neutrality policies.  The Commission has deferred a position on this matter until at least the first meeting in May.

NOTES AND COMMISSIONER REPORTS

  • Grueneich Report Seeking Bridge Funding for Communities for Telecom Rights – Commissioner Grueneich gave a brief Commissioner Report summarizing her meeting this week with the consumer group Communities for Telecom Rights (“CTR”).  This group is a network of community-based organizations throughout the state that was formed by previous CPUC decisions resolving allegations of wrongdoing against certain carriers.  As Grueneich noted, this conglomeration of consumer groups has been particularly active in informing non-English speaking customers of their rights in the telecommunications marketplace.  At the end of June 2005, the current funding for these groups (derived originally from telecommunications carriers) will expire.  Recently, CTR has become active in the consumer education phase of the consumer protection proceeding.  Grueneich urged her fellow Commissioners to work with her to find a way to identify some further funding for CTR, either from the Commission’s own resources, through a more formal state mechanism, or from another source. 

 

  • Chong Report on Universal Service Workshops – Commissioner Chong reported on the day and a half of workshops that were held this past week to address various public policy programs related to universal service, including the Universal Lifeline Telephone Service (“ULTS”) fund, the California Teleconnect Fund (“CTF”), and the Deaf and Disabled Telecommunications Program (“DDTP”).  These workshops were a precursor to a universal service OIR that is expected to be issued within the next month, and provided a valuable opportunity for parties to influence the direction and scope of that anticipated rulemaking.  As Commissioner Chong noted, the workshops were well attended by carriers, consumer groups, and by certain members of the public.  Commissioner Chong described the workshop discussions as “enlightening,” and noted that the “lack of regular review” of these programs was of great concern to her.  In conducting the upcoming review of the programs, Chong promised to consider the important social benefits that these programs provide, as well as the significant financial burden that they entail, and the competitive and policy issues that they implicate.  Chong further noted the importance of administering these programs in a competitive and technology neutral manner, and to update the programs to reflect changes in markets and technologies now and in the future.  

 

  • Further Update on Consumer Education and Enforcement Efforts – As has become a pattern at recent Commission meetings, Jack Leutza, Steve Larson, Richard Clark, and Phillip Enis provided an extensive summary of the Commission’s efforts to implement the consumer education and enforcement directives in the consumer protection decision passed earlier this year. Telecommunications Division Director Leutza began the report, noting that the Department of Finance has approved the Commission’s funding proposal in connection with the consumer protection initiative.  The proposal will now move on to the Legislature.  If approved, these funds will allow the Commission to revamp its procedures internally, and will provide assistance to various consumer groups who are involved in the consumer education aspects of this effort.  With regard to CTR, mentioned in Commissioner Grueneich’s report (above), Leutza noted that bridge funding has been identified to carry the group through October, but that additional funding would have to be put in place at that time.  To fund this group, the Commission would ultimately have to go through the open bidding process, which can be time-consuming.    Phillip Enis discussed some other consumer education developments, including the workshop scheduled for Friday, April 28, 2006 to take stock of the work being done by the “outreach” and the “content” task forces that are working as part of that effort.  Enis also mentioned that the consumer protection leadership is exploring how best to handle “in language” informal complaints, and how best to distribute consumer education materials “in language.”  On a side-note, Enis also mentioned that some customers appear to be confused by the CAB phone number as it appears on their bills, since some customers believe that they are calling the carrier when they reach CAB.  This generates significant confusion, because CAB does not always have the specific detail that is necessary to answer these customers’ questions, as a carrier likely would.  At that point, Commissioner Chong interjected, and asked carriers whether they wouldn’t mind looking into the configuration of the CAB number relative to the carrier’s own number, and consider ways that this could be improved.   CPSD Director Clark reviewed some of his own efforts to promote the consumer protection initiative.  In particular, he mentioned that comments have now been submitted on the proposed slamming citation program, and that he would be meeting with the FCC and the FTC in upcoming weeks to look into ways to develop synergies between their procedures and the Commission’s own enforcement mechanisms.  

 

  • Clanon Report on Administrative Issues Within the Commission – The meeting concluded with a management report from Deputy Executive Director Clanon regarding a host of administrative issues at the Commission.  Joking with Commissioner Peevey that “I know you in particular look forward to these reports,” Clanon identified a number of issues for the Commissioners’ consideration.  He noted that the Commission cafeteria might have to close if improvements are not made, that a new document management system has now been implemented at the Commission, that the size of the cubicles will be increased, and that a feasibility study has been commissioned to revamp the CAB complaint database. 

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