On Thursday, July 20, 2006, the CPUC held its regularly-scheduled agenda meeting. The agenda featured numerous telecommunications-related items, many of which were disposed of on the consent agenda. The Commission passed the public policy fund budget resolutions, revised the CPUC Rules of Practice and Procedure, modified the permanent CHCF-B surcredits for Frontier and Verizon, resolved residual disputes regarding the Triennial Review Order and Triennial Review Remand Order, and penalized SBC for failing to meet its repeat and initial “out-of-service interval” goals for 2005. The Commissioners also vigorously debated the appropriate position to take on SB 440, a piece of consumer protection legislation responding to alleged problems regarding unauthorized charges on customers’ bills. Each of the significant telecommunications-related items on the agenda are addressed below.


  • CPUC Penalizes SBC $900,000 For Failing to Meeting Out-of-Service Interval Standards During 2005, Resolutions T-17024a and T-17024b (Items 55 and 56, Item 56 adopted 3-2) — By this item, the Commission adopted the more lenient of two potential penalty options against SBC for the company’s failure to meet “out of service” interval standards. CPUC Decision 01-12-021 established standards that SBC must meet for initial repair “out of service” intervals, and repeat “out of service” intervals for residential customers. According to that decision, SBC is subject to penalties if it does not meet these standards. SBC’s 2006 ARMIS reports revealed that it failed to meet the applicable “out of service” standards for all of 2005. Nevertheless, SBC sought a waiver of penalties for the entire year, in part based on a state of emergency during the first quarter of the year, and in part due to the “delaying effects” of customer-requested appointments on service restoration. This decision imposed $900,000 in penalties against SBC in connection with initial “out of service” intervals during which there was not a declared “state of emergency.” In addition, SBC is ordered to file a petition to modify D.01-12-021 to ensure that SBC’s current policies will properly serve customers. The alternative resolution, item 55, would have imposed $2.4 million in penalties.

    Telecommunications Division Director Leutza introduced both items for the Commission’s consideration. Leutza noted that SBC had been reporting under D.01-12-021 since 2002, and that 2005 was the first year in which the company failed to meet the standards. Although that decision did include a couple of exemptions, these apply only where “a state of emergency has been declared,” or where “widespread events” affected more than 3% of SBC’s customers. Leutza emphasized that the standards are designed to account for the fact that customers will reschedule service appointments, suggesting that customer-requested appointment issues cannot be an excuse for SBC’s non-compliance.

    Commissioner Chong chimed in swiftly on this item, expressing strong support for imposing the more modest penalty. According to Chong, the $900,000 penalty is a “good middle ground” that is sufficient to send a message to SBC. She dismissed the notion that SBC should be punished for rescheduling customer appointments, saying that this “doesn’t make any sense,” since “we are trying to advance the interests of customers where we can.” Commission Brown came quickly to the defense of the staff-supported $2.4 million penalty. Brown concluded that the staff had undertaken a “judicious review” of AT&T’s issues, and come to a reasonable conclusion. This is particularly reasonable given that these are standards that SBC “had signed onto.” Grueneich also supported item 55 after confirming that the staff had considered the possible impact of its recommendation on SBC’s ability to modify customer service appointments. Ultimately, Bohn, Peevey, and Chong supported item 56, and it passed 3-2.

  • Revised Permanent CHCF-B Surcredits Adopted for Frontier and Verizon, Resolutions T-17008 and T-17009 (Items 57, 57a / 58, 58a, Items 57 and 58 adopted 5-0) — These related items adopted adjustments to the permanent CHCF-B surcredits for Frontier and Verizon, to be effective on a going-forward basis. The Commission also deferred to a later set of resolutions the issue of what the appropriate “catch up” CHCF-B surcredits should be for the periods during which the surcredits were insufficient to compensate ratepayers for the amounts that the companies were receiving from the CHCF-B. For Frontier, the Commission adopted a 3.63% surcredit, finding that the 3.07% surcredit that was in place between 1998 and 2006 was insufficient. The new Verizon surcredit will be 3.38%.

    Telecommunications Division Director Leutza began by reciting some history of the CHCF-B surcredits. He noted that the surcredits began to compensate customers for the difference between the rates that these companies charge, and the monies that they receive from the CHCF-B for serving high cost areas. From 1998 to 2006, Frontier had a 3.07% surcredit. While this surcredit was accurate initially, it was eventually “not quite enough” in Mr. Leutza’s words. Verizon’s surcredit was similarly insufficient. Both Commissioner Chong and Director Leutza pledged to bring another set of resolutions before the Commission as soon as possible to deal with the “true up” CHCF-B surcredit. The alternate decisions, items 57a and 58a, would have taken immediate action on the “true-ups” rather than deferring the issue to a later set of resolutions. Ultimately, items 57 and 58 were adopted unanimously.

  • CPUC Votes to Oppose Legislation Addressing Unauthorized Charges for Telecommunications Services, SB 440 Oppose position adopted, 3-2) – Following an intense debate amongst the Commissioners, the CPUC voted narrowly to oppose SB 440, a bill currently pending before the California legislature. This bill would adopt an assortment of requirements related to the placement of unauthorized charges on customers’ bills. The bill would authorize wireless telephone subscribers to rebut evidence that dialed calls were authorized by showing that the phone was stolen or lost. It would also require billing companies to provide an extensive set of disclosures with their bills regarding consumers’ rights with respect to alleged unauthorized charges.

    The discussion of this item was contentious, and revealed a clear philosophical split between the Commissioners regarding the Commission’s approach to consumer protection. The staff recommendation on the bill was “oppose unless amended,” in light of the general policies adopted in the consumer protection decision that enforcement and consumer education were more effective ways to protect consumers than prescriptive rules. Once the staff introduced this item, Commissioner Peevey began the discussion. Realizing that he was on the brink of a ferocious debate, Peevey chuckled that there was “disagreement within the legislative subcommittee,” since he and Commissioner Grueneich were unable to agree on how the CPUC should react to the legislation. Peevey supported the staff recommendation, while Grueneich would prefer to adopt a “support” position toward the legislation.

    Seeming already exasperated, Commissioner Brown announced that he was “putting away his prepared remarks.” He described the legislation as “pared down” and designed to do “only a couple of things,” like requiring a warning if a phone is used in an unauthorized manner. Getting angrier, Brown described it as “embarrassing” that an institution like the Commission that was built to “protect people against abuses” would take an oppose position on this legislation. He warned that the Legislature is “looking at [the Commission] incredulously,” and accused the majority of “being on the side of the cell phone industry” rather than the side of consumers. Commissioner Grueneich echoed Brown’s disagreement with the “oppose” position, although in less rhetorically-charged terms. Grueneich emphasized that the consumer protection decision does not compel an approach to any particular piece of legislation, and that the goals of consumer education and enforcement are not at odds with the rules that would be put in place by SB 440. Grueneich summarized her position by stating that the fundamental question is whether “there is yet another mechanism that makes sense to also educate consumers.” She believes that there is, and that this legislation is a reasonable mechanism to do so, particularly since the educational materials at issue would be placed in the bill, a place that the consumer is sure to look.

    Commissioner Chong fired back at Brown’s sentiments. “We are on the side of the consumer,” Chong assured the audience, “and we said that in the order.” Chong emphasized that many elements of the legislation have already been addressed in the consumer protection decision, in the new cramming rules. Moreover, Chong noted that there is an ongoing process to further evaluate the cramming reporting requirements. Chong mentioned the recent cramming workshop, and stated that “we are talking through all the issues in great particularity with the carriers and consumer groups.” She then offered some pointed thoughts on the notion that multistate carriers should be forced to print extensive California-specific disclosure language on the bills. Chong concluded that this “makes no sense,” and added that “from [her] FCC experience, [she] can see that, and [she] is sorry that nobody else can see that that just creates extra costs for consumers . . .”

    Brown briefly retorted with the statement that “California is not Rhode Island; it is a nation, virtually,” and that landline companies routinely make state-specific billing adjustments. Commissioner Bohn then calmly stated his position, emphasizing the importance of “distinguishing between substance and process.” Bohn agreed to support the staff recommendation for “perhaps an arcane reason.” Bohn believes that “it is not appropriate at the legislative level to deal with this level of minutiae,” and that the issues would be better left to the Commission. Ultimately, the “oppose unless amended” position was adopted, with Brown and Grueneich as the dissenters.

  • New DDTP Fund Surcharge Rate Approved, Resolution T-17044 (Item 19, adopted on consent agenda) — This item approves a new surcharge rate for the DDTP fund, effective August 1, 2006. The new surcharge rate is .05%, which is a decrease from the current rate of .27%.

  • Public Policy Fund Program 2007-2008 Budgets Approved, Resolutions T-17046, T-17028, T-17042, T-170043 (Item 19, adopted on consent agenda) — This item approves a new surcharge rate for the DDTP fund, effective August 1, 2006. The new surcharge rate is .05%, which is a decrease from the current rate of .27%.

  • United Way Granted Authority to Use 2-1-1 Dialing Code for Information and Referral Services in Stanislaus County, Resolution T-17041 (Item 29, adopted on consent agenda) — This Resolution grants the United Way of the Stanislaus Area, Inc. (United Way of Stanislaus) authority to use the 2-1-1 dialing code to provide information and referral services to Stanislaus County. In the upcoming months, carriers providing end user service to Stanislaus County will be filing advice letters outlining how they will provide originating 2-1-1 service, in compliance with Commission Decision 03-02-029. If the 2-1-1 implementation schedule goes according to plan, 2-1-1 will be rolled out in Stanislaus County in May 2007.

  • Verizon Avenue Corporation Granted Authority to Exit the California Market (Item 22, adopted on consent agenda) — This decision granted Verizon Avenue Corporation’s (“Verizon Ave.”) application to withdraw its provision of resold local exchange and related bundled service offerings, and to relinquish its CPCN. AT&T will assume all of Verizon Ave.’s remaining customers. The Commission facilitated the migration of customers from Verizon Ave. to other carriers by using the rules that have been proposed in the “Mass Migration” proceeding, R.03-06-020. These rules have not been formally endorsed by the Commission, and the issues in that proceeding are still outstanding, but Verizon Ave. was permitted to use those procedures in effectuating its customer migration.

  • Commission Orders Significant Streamlining of Rules of Practice and Procedure (Item 6, adopted on consent agenda) — This decision marked the culmination of a recent effort, led by ALJ Yacknin, to streamline and update the Commission’s Rules of Practice and Procedure. According to Commissioner Chong, who spoke briefly on the subject, this revision resulted in a 40% reduction in the verbiage of the current rules, and resolved numerous ambiguities and redundancies in the previous rules. The revisions are wide-ranging, and impact a number of areas, including the following: proposed decisions, ethics, verifications, pre-hearing conferences, discovery, calendar notice procedures, and responses to amended filed documents.

  • Commission Dismisses Longstanding Complaint by Westcom Long Distance Against Pacific Bell and Others (Item 4, adopted on consent agenda) — Based primarily on the doctrine of “unclean hands,” this decision grants three motions to dismiss a complaint brought in 1992 by Westcom Long Distance, Inc., and its owner, Michael Sunde, against Pacific Bell, and a variety of interexchange carriers. The original complaint alleged that Pacific Bell was orchestrating a scheme whereby interexchange carriers purchased Centrex and business lines from Pacific, and used them instead of purchasing switched access. According to the complaint, this arrangement confers an unfair competitive advantage on interexchange carriers that purchase these services from Pacific Bell, and also “undermines the incentive-based regulation” to which Pacific Bell is subject. Setting aside the merits of any complaint that Westcom may have had, Westcom’s “alter ego” and owner, Michael Sunde, apparently engaged in various forms of abuse of process, which compelled the Commission to dismiss the complaint.

  • Commission Grants Qwest Complaint Against Pacific Bell Alleging Excessive Collocation Payments (Item 10, adopted on consent agenda) — This decision rules in Qwest’s favor on a dispute against Pacific Bell regarding the rates that Pacific is charging Qwest for collocation. Qwest had complained that SBC unlawfully applied interim collocation rates differently depending on when the collocation service was ordered. Qwest purchased its collocation service at a certain rate, and then Pacific Bell lowered its interim collocation rate, and sold collocation service to later purchasers at that lower price. This decision finds that Qwest was entitled to be charged in accordance with the current interim rates, regardless of the fact that the rates will eventually be “trued up” when final collocation rates are put in place. The decision orders Pacific Bell (now AT&T) to tabulate the differences between the amount paid and the more current rates, and refund the difference to Qwest, plus interest.

  • Final Resolution of TRO and TRRO-Mandated Amendments to Interconnection Agreements (Item 54, adopted on consent agenda) — This decision resolves residual disputes between CLECs and Verizon regarding the impact of the Triennial Review Order and Triennial Review Remand Order on the parties’ interconnection agreements. Within 10 days of the effective date of this decision, the parties are directed to file their final, amended interconnection agreements.


  • Decision Resolving Dispute Regarding Rule 94 of General Order 95 (Item 40, held by Peevey until 8/24 for further deliberation) – This item would modify Rule 94 of General Order 95, and thereby adopt revised rules for attaching wireless antennas on jointly used utility poles and towers. In doing so, the decision would reject assertions by some parties that certain elements of Rule 94 are preempted by the FCC’s rules regulating radio frequency emissions.

  • Decision Modifying CEQA Requirements as Applied to Telecommunications Utilities (Item 51, held by Bohn until 8/24 for further consideration) — This decision would resolve the Commission’s current inquiry into its policies for implementing the California Environmental Quality Act (“CEQA”) in the telecommunications industry. The current proposal, embodied in the Draft Decision of Commissioner Brown, would provide for an Expedited Treatment Process that would evaluate a wide variety of utility projects for possible CEQA treatment. The proposal has been the subject of significant comment and debate amongst the interested parties, many of whom object to the Brown Draft Decision as excessive and beyond the proper scope of the Commission’s CEQA interests.

  • Resolution of Triennial Review Order Proceeding (Item 52, held by Peevey until 8/24 for further consideration) — This decision would dispose of all outstanding issues in the Triennial Review Order phase of the local competition docket, including the Petitions for Modifications filed by the ILECs seeking to terminate the requirement that batch hot cut processes and pricing disputes be arbitrated.

  • Decision Resolving Arbitrated Interconnection Agreement Between MCI and Pacific Bell (Item 53, held by Brown until 8/24 for further deliberation) — This decision would approve the April 19, 2006 Final Arbitrator’s Report, subject to two clarifications.


  • Report on Consumer Protection Initiative – The Commission staff gave a brief status report on the consumer protection initiative. Director Leutza noted some major accomplishments in the staffing area. So far, 14 out of 15 consumer affairs representatives have been appointed, 7 of which are bilingual. Also, the Consumer Protection and Safety Division is aggressively recruiting enforcement analysts. Leutza also mentioned that the Commission is working with a Limited English Proficiency expert, who is participating in the “in language” phase of the consumer education initiative. Leutza also identified the states for the upcoming “in language” workshops, in which the Commission will further evaluate consumers’ language needs. Finally, Leutza summarized the schedule for the cramming phase of the consumer protection initiative, which will be ongoing throughout the late summer and early fall.

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