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On December 20, 2007, the California Public Utilities Commission held its regularly-scheduled agenda meeting. The meeting was the last of the year, so the Commission addressed a wide variety of items to clear the decks for 2008. Commissioner Peevey opened the meeting with a hint of holiday cheer, noting that for those in the audience, you will see whether there is anything under the tree for you.”

The most significant telecommunications item under the tree was the decision adopting the California Advanced Services Fund. The Commission also adopted new surcharges for the Deaf and Disabled Telecommunications Program and the California High Cost Fund A. These and other telecommunications-related items of interest are described in further detail below.


REGULAR AND CONSENT AGENDA ITEMS

  • California Advanced Services Fund Adopted (Item 58, adopted 5-0) – This decision initiates the California Advanced Services Fund, a CPUC-administered program to facilitate broadband deployment to “underserved” and “unserved” areas of California. Beginning on January 1, 2008, carriers will be collecting a 0.25% surcharge on retail telecommunications customers’ bills to fund the CASF. With these monies, the Commission intends to generate more than $100 million in funding for the CASF, to be distributed to qualifying entities for the purpose of bringing broadband services to areas where no facilities-based provider currently offers broadband service, or where no provider provides broadband of a sufficient speed. Under the decision, “unserved” areas are any service regions where no facilities-based provider offers broadband service, such that internet connectivity can only be achieved through dial-up. An “underserved” area is one where facilities-based broadband exists, but where no provider has achieved at least three Megabytes per second download speeds, and one Megabyte per second upload speeds. Applications for funding under the CASF will begin being accepted on June 2, 2008.

    Commissioner Chong introduced this item, stating that the decision will bring California’s universal service commitment to a higher “nation-leading level” by bringing broadband to all Californians, whether they live in rural or remote areas, or whether they live in underserved urban areas. By way of background, Chong restated her mantra that the CPUC’s telecommunications reform strategy has been a “three-legged stool.” First, steps needed to be taken to provide deregulatory reforms that would put carriers on an even playing field in the modern competitive market. That has been accomplished through the still-ongoing Uniform Regulatory Framework proceeding. Second, intrastate access charge reforms were necessary. These have now been completed through the recently-concluded access reexamination proceeding. Third, the Commission must reform its universal service rules to ensure that they do not skew competition. The CHCF-B reform decision adopted earlier this year is an important step in that regard, and further developments in the CHCF-B relook proceeding will continue through next year. The Commission will also look at potential reforms of the CHCF-A.

    According to Chong, recent developments in regulatory policy confirm that the Commission’s approach to deregulation, access reform, and universal service is the correct path. With the passage of the video franchise legislation and the Commission’s implementation of that legislation this past year, “billions of dollars in investments in new fiber networks” were unleashed. As part of the legislation, often referred to as the Digital Infrastructure and Video Competition Act, or DIVCA, the California Legislature directed the Commission to promote widespread access to cable and video services in a non-discriminatory manner. The Legislature also stated that the Commission should take steps to close the digital divide. Further, the Federal-State Joint Board on Universal Service recommended that broadband internet service and wireless mobility service be included in the definition of universal service. The FCC is currently considering the Joint Board’s recommendations. Chong cited all of these developments as support for the creation of the CASF in California. As Chong proudly announced, “it is time to stop talking about it, and time to do it.”

    Commissioner Chong provided further details regarding the goals and specific operation of the program. The CASF will be designed to go beyond providing funding where there is a business case to provide broadband. Chong believes that this will go a long way toward closing the digital divide in areas where “market failures” have occurred. Although she acknowledged that there are demand-side consumer issues and other obstacles to increasing broadband penetration rates, the CASF’s approach will be to provide broadband availability first, and deal with the other issues in the future. The funds will first be targeted to unserved areas, and then funding will be directed to underserved areas.

    The CASF will be implemented by an all-services surcharge of 0.25%, to be collected over two years. Chong clarified that there will not be a diversion of CHCF-B monies to the CASF. The new CASF is limited to a $100 million funding level. For the average phone user, the cost of the program for customers will be approximately a nickel a month, according to Commissioner Chong.

    In closing, Commissioner Chong mentioned that she believes that the Commission has independent authority to order the collection of CASF funds, but that the Commission would be seeking Legislation directing that the funds be appropriated in the California Treasury annual budget. The Legislation would also modify the Public Utilities Code to confirm the Commission’s creation of the CASF. This will clarify the Commission’s authority in this area.

    A brief discussion erupted amongst the Commissioners regarding the appropriations and jurisdictional issues raised by the CASF proposal. Commissioner Simon pointedly inquired whether the implementation of the program was contingent upon approval of the Commission’s proposed legislation. Simon asked whether “hypothetically, if this legislation were not to pass, it would not impact this program?” Chong replied succinctly: “that is correct.” Commissioner Grueneich then stated that “if the legislation does not pass, I thought that we would need to take a close look at the decision we adopted today.” Commissioner Chong then restated her view that “we would be able to proceed with the program” without regard to the legislation. In response, Commissioner Bohn asked General Counsel Wu for further confirmation of Commissioner Chong’s belief, and he again offered his conclusion that the Commission has independent authority to pursue all aspects of the CASF program, with or without companion legislation.

    Workshops will take place during 2008 to further define the application process, and the requirements that will be placed on successful applicants. However, based on this decision, applicants must have either a CPCN or a CPCN-equivalent from the Commission. According to Commissioner Chong, the funds will not be authorized to recover generalized operating expenses, but will be targeted to fund capital projects.

    Commissioner Peevey made some final comments to clarify that there would be coordination between the CASF and the California Emerging Technologies Fund. The most recent draft of the decision is available at the following link: http://docs.cpuc.ca.gov/word_pdf/AGENDA_DECISION/76840.doc.

  • DDTP and CHCF-A Surcharge Resolutions Adopted, Res. T-17127, T-17128 (Items 7, 8, adopted on consent agenda) – This pair of resolutions established revised surcharge rates for the Deaf and Disabled Telecommunications Program and the California High Cost Fund A. Effective January 1, 2008, the DDTP surcharge rate will be reduced from 0.37% to 0.20%, and the CHCF-A surcharge rate will be reduced from 0.21% to 0.13%. The most recent drafts of the resolutions effectuating these surcharge changes are attached below.

  • Frontier Granted Authority to Grandfather Employee Discount Program, Res. T-17125, T-17126 (Items 21, 22, adopted on consent agenda) – These resolutions grant the requests of Frontier Communications of Golden State and Frontier Communications of Tuolumne to grandfather their 50% employee discount programs. Existing and retired employees will retain their current benefits, but Frontier has restructured its employee discounts to provide a 50% discount on its Frontier Digital Phone bundle, which includes basic service, custom calling features, and voice mail. This will be available to new employees and existing employees alike. These employees will also be eligible to receive a 25% employee discount on their unlimited long distance portion of their Frontier Digital Phone bundle. The most recent drafts of the resolutions permitting the grandfathering of these services are attached at the following links:

  • Interconnection Agreements Between Pac-West and Small LECs Adopted, Res. T-17116, T-17117 (Items 13, 14, adopted on consent agenda) – These resolutions establish interconnection and compensation agreements between Pac-West TeleComm, Inc., and Foresthill Telephone Company and between Pac-West and Kerman Telephone Company. Recent drafts of the resolutions are attached at the following links:

  • Assorted TDS Interconnection Agreements Adopted, T-17119, T-17099 (Items 16, 35, adopted on consent agenda) – Resolution T-17119 approves an interconnection agreement between Winterhaven Telephone Company and wireless provider NTCH-CA, Inc. Resolution T-17099 approves an interconnection agreement between Happy Valley Telephone Company and Charter Fiberlink, also a wireless provider. Both Happy Valley and Winterhaven are TDS affiliates. The resolutions adopting these interconnection agreements are attached at the following links:

  • AT&T Granted Permission under 851 Pilot Program to Sell Property in El Cerrito, California, Res. T-17131 (Item 26, adopted on consent agenda) – This resolution grants AT&T’s request under the Section 851 pilot program to sell a mostly-vacant lot in El Cerrito, California to an individual purchaser. Except for “a small corner of the lot,” the property is unused and vacant. The property encompasses 5,649 square feet, approximately 234 square feet of which contains an AT&T-owned cabinet housing a Service Area Interface (SAI). AT&T has retained sufficient easement authority to continue to operate and maintain this equipment. The property has an estimated value of $325,000. A recent version of the draft resolution is available at the following link: http://docs.cpuc.ca.gov/word_pdf/AGENDA_RESOLUTION/76473.doc.

  • Dispute Between Pac-West and PAETEC Resolved Item 23, adopted on consent agenda) – This decision resolves the dispute between Pac-West and PAETEC regarding disputed termination charges that Pac-West believed were owed under its tariffs. The parties reached a settlement in Delaware Bankruptcy Court, so this matter has been dismissed. A copy of the proposed decision dismissing this matter with prejudice is attached at the following link: http://docs.cpuc.ca.gov/word_pdf/AGENDA_DECISION/75761.doc.


SIGNIFICANT HELD AND WITHDRAWN ITEMS

  • Proposed Decision on CALTEL Petition for Rules Governing Retirement of Copper Loops (Item 59, held by Peevey until 1/10/08 for further review) – This proposed decision would grant CALTEL’s petition for rulemaking to examine procedural and substantive rules governing the removal and retirement of copper facilities within telecommunications networks. The proposed decision contains a preliminary scoping memo that outlines a variety of issues to be considered in the proposed proceeding, including whether carriers should be prevented from removing or retiring copper facilities, and whether carriers who wish to do so should be required to provide notice to the Commission or other carriers. The current version of the proposed decision is available at the following link: http://docs.cpuc.ca.gov/word_pdf/AGENDA_DECISION/76497.doc.


NOTES AND COMMISSIONER REPORTS

  • Chong Encouragement of Consistency Across Utility Sectors Regarding Consumer Protection Guidelines – In response to a presentation regarding a new Order Instituting Rulemaking to reform standards for water utilities, Commissioner Chong mentioned that the Commission should be more cognizant of how consumer protection standards are being applied to various utility groups. She asked the Water Division representative whether the Water Division had considered implementing any “in language” requirements in connection with the OIR. When the Water Division representative stated that standards of this sort had not been considered, Commissioner Chong mentioned that she recently had a meeting with energy utilities to discuss the types of “in language” services that they are providing.

  • Simon Report on Round Table Discussions Regarding Utility Deposit Practices –- Commissioner Simon gave a brief report regarding some discussions that he has had recently with the energy utilities regarding their deposit practices. Simon has been concerned about the impacts that the deposit requirements have on low-income consumers, and has been looking for ways to improve the practices in that area. Commissioner Simon reported that the discussions with PG&E, Southern California Edison, and Sempra were quite productive.

    Based on those discussions, Simon identified two ways in which the utilities’ deposit practices could be improved for the benefit of consumers. First, Simon would like to promote the “bill guarantor” option, whereby a relative could guarantee the amount of a customer’s bill. This would provide a way for more low-income individuals to avoid the burdens of providing a deposit. Second, Simon would like to push for additional consumer education regarding how to keep energy bills low.

  • Chong Report on Emerging Issues Policy Forum on Advanced Telecommunication Issues –- Commissioner Chong briefly described her participation in a recent meeting of the Emerging Issues Policy Forum on Advanced Telecommunication Issues. By way of background, she noted that the group consists of various federal and state representatives in the telecommunications field, including FCC representatives and members of NARUC. This particular meeting was also attended by local mayors and state legislators.

    Chong briefly summarized some of the discussions at the forum. Those discussions included a consideration of how to best encourage broadband deployment, and how that may be best accomplished. Chong noted a division amongst the participants, with about half of the states “urgently wanting broadband,” and the other half being not that convinced that they need it. Chong also mentioned that there was a discussion of how to streamline telecommunications fees and surcharges on consumer bills.

  • Commissioner Chong Announces New Legal Advisor, Joe Como –- Commissioner Chong announced that she will be adding Joe Como to her office as a legal advisor. Como has spent time in the CPUC Legal Division, and has also worked in the San Francisco City Attorneys’ Office, as well as spending 15 years as a civil engineer. Como will advise Commissioner Chong mostly on energy issues. Robert Haga and Jane Whang will continue to advise Chong on telecommunications matters.

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