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On Thursday, June 15, 2006, the CPUC held its regularly-scheduled agenda meeting. Despite a relatively light telecommunications agenda, an extensive discussion took place regarding whether or not the Commission should support SB 440, a piece of pending legislation to implement additional requirements regarding carriers’ treatment of unauthorized charges on bills.  In debating the merits of this bill, the Commissioners addressed a wide range of topics, and provided some interesting insights into the Commission’s approach to implementing Public Utilities Code Section 2890, as well as the “cramming rules” adopted in the consumer protection decision.


REGULAR AND CONSENT AGENDA ITEMS

  • CPUC VoIP Proceeding Closed (Item 8, adopted on consent agenda) — This decision closes the CPUC’s investigation to develop an appropriate regulatory structure for VoIP services and technologies, I.04-02-007.  The Commission opened this investigation in February 2004, before the FCC issued its NPRM addressing regulatory issues related to IP-enabled services.  In the Order Instituting Investigation, the CPUC had signaled an intent to apply some California public utility regulations to VoIP service offerings.  The OII announced the CPUC’s “tentative conclusion” that “VoIP that is interconnected with the Public Switched Network qualifies as a public utility telecommunications service.”  Opening and reply comments were submitted on this OII, but the proceeding ultimately lost momentum once the Vonage decision made it clear that the FCC had federalized the issue of how VoIP will be regulated. 

    In closing the California VoIP proceeding, the Commission notes that “we need not establish a regulatory framework for Voice over Internet Protocol telephony . . . to resolve any of the issues raised in this investigation at this time.”  Although the FCC has stated that “states would continue to play a vital role in certain areas such as consumer protection,” the FCC has yet to define the precise role that states will have in regulating VoIP.  In comments on this decision, no party suggested that the proceeding should remain open.  However, several consumer groups suggested that the consumer protection decision (D.06-03-013) should be extended to VoIP providers.  The decision declines to expand the scope of the consumer protection decision in that manner.  The Commission observes that its “regulatory role is still uncertain” and that it “ha[s] not found an immediate need to address VoIP consumer protection issues.”  The decision notes that the CPUC is “tracking VoIP complaints” and that there has not been “a high number of complaints” or “a significant increase in complaints.”

  • CPUC Votes Not to Take a Position on Legislation Expanding Rules Addressing Unauthorized Charges on Bills, SB 440 (Item 51, no position taken, returned to legislative subcommittee) — This item provided the Commission with an opportunity to take a position on SB 440, the currently-pending bill to implement additional rules to combat the placement of unauthorized charges on phone bills.  In particular, the bill is intended to minimize the circumstances in which wireless customers may be responsible for unauthorized charges when their phones have been lost or stolen.  The bill would specifically define “unauthorized charges” under Section 2890 of the Public Utilities Code to include “charges incurred using a lost or stolen telecommunications device.”  This bill would also require entities that render telephone bills to include an extensive set of disclosures regarding customers’ “billing error rights” on each bill.  Moreover, the bill would establish some mechanisms by which customers can rebut the presumption that a charge initiated by a dialed call is authorized.  The presumption could be rebutted by:  (1) a record of lack of affirmative user authorization; (2) a lack of demonstrated pattern of knowledgeable past use; or (3) other persuasive evidence of lack of authorization.  Each of these requirements would be codified in a modified Public Utilities Code Section 2890.

    The CPUC’s legislative subcommittee recommendation was to oppose the bill, based on concerns that the proposed bill disclosures are too onerous, and based on suggestions that the legislation would contravene the CPUC’s policy position (memorialized in the consumer protection decision) that consumer education and enforcement are superior to prescriptive rules in protecting consumers.  The Commission staff introduced this item, emphasizing that SB 440 would conflict with the policy embodied in the consumer protection decision regarding “cramming.” (D.06-03-013, Appendix A, Part 4).  The staff perceives that the legislation would put too much of a burden on consumers to rebut the presumption that a charge is unauthorized.  Further, the staff believes that the 30-day complaint resolution period in the cramming rules is superior to the open-ended resolution timeframe under the legislation.

    Following the staff’s introductory comments, an extensive discussion ensued, in which the Commissioners ferociously debated the merits of the legislation.  Commissioner Brown began the discussion strongly endorsing the legislation.  He related an anecdote about a woman whose cellular phone was stolen, and who was then charged for $26,000 in unauthorized calls.  Even though the woman produced a passport and an airline ticket demonstrating that she was out of the country at the time the calls were made, Cingular Wireless apparently “refused to compromise in any way.”  According to Brown, Cingular insisted that the customer pay the charges, and upon hearing that she could not, the company threatened her credit, even going so far as to suggest that she declare bankruptcy.  When the matter later received significant media attention, Cingular “reversed its position . . . all of a sudden.”  Brown stated that “this is hardly an isolated incident.”  He then noted that Cingular’s contract provides that a customer is responsible for all charges incurred on a lost or stolen cell phone until the phone is reported to the carrier as missing.  Again, Brown insisted that this policy is consistent with that observed by other providers.  If the “risks were equal” between the carrier and the customer, Brown argued, Cingular’s policy “might be reasonable.”  However, since carriers have the ability to monitor customers’ calling patterns and identify unusual and potentially unauthorized calling behavior, Brown believes that the risk of loss from unauthorized charges should be placed on carriers.  According to Brown, the carriers should not “profit from fraud that they could prevent” when they could easily limit this liability.  Brown also analogized the legislation to the federal credit card fraud rules, and suggested that the new rules would benefit wireless consumers in a similar manner.  Finally, Brown emphasized that the “contracts of adhesion” that are used by wireless carriers obviate any suggestion that “consumer choice” could protect customers.  Brown concluded that if the Commission is “faithful to its duty to protect consumers,” it would support SB 440.

    Commissioner Chong responded with a strong rebuttal to Brown’s comments, arguing that SB “provides more of a burden than a benefit” to consumers.  Chong noted that existing law and regulations already protect against the circumstances in Brown’s hypothetical.  Chong reiterated her belief that “new rules” are not the solution to whatever problems may exist.  Chong then suggested that SB 440 could cause wireless carriers to implement “pin numbers” that would have to be entered whenever a cell phone is used, in order to ensure that the proper subscriber authorization is obtained.  As Chong emphasized, this outcome would harm consumers by introducing an additional barrier to wireless phone use that would annoy and frustrate many customers.  Chong also observed that the legislation would apply to wireline carriers as well, so a similar procedure could be implemented in that context.  Chong described this as “overkill,” particularly given that there are already existing protections in place addressing the issue.  Regarding Cingular’s policy of holding customers responsible for unauthorized charges until a phone is reported lost or stolen, Chong insisted that this contract language would be null and void as contrary to the current requirements of Public Utility Code Section 2890 and the Commission’s policy for implementing those requirements.  According to Chong, the disclosure language required by SB 440 is also way beyond what is necessary, and it is not the appropriate way to communicate with consumers.

    A discussion then ensued regarding the extent to which the contract terms mentioned in connection with Brown’s hypothetical would be considered unenforceable under existing law.  Both Commissioner Chong and General Counsel Wu insisted that Cingular’s policy that customers must report a phone lost or stolen to avoid responsibility for unauthorized charges is inconsistent with the Commission’s “policy” as articulated in the consumer protection rules.  Commissioner Grueneich asked General Counsel Wu whether these provisions would be unenforceable retroactively, such that any customers currently containing such provisions would be of no effect.  A clear answer to the question was never reached.  

    Ultimately, Commissioners Bohn and Chong supported the “oppose” position recommended by the staff, but Brown, Grueneich, and Peevey voted against the staff recommendation.  Peevey acknowledged that he had not paid close enough attention to this matter when it was in the legislative subcommittee, and indicated that he did not feel right opposing the bill based on current information.  This matter will be returned to legislative subcommittee for further examination, but as of now, the Commission has no position on SB 440.

  • AT&T Granted Deviation from Public Utilities Code 320 Undergrounding Requirements, Res. E-3975 — (Item 6, adopted on consent agenda) This resolution grants AT&T’s request for a deviation from the requirements of Public Utilities Code Section 320, which requires that any new communications or electric distribution facilities be undergrounded if they are in close proximity to designated California scenic highways.  AT&T requested this deviation to allow it to add 20 miles of aerial fiber optic cable along Highways 89 and 50, in El Dorado County.  These are California scenic highways, so any new construction along this corridor is subject to an undergrounding requirement, absent a Commission-endorsed deviation.  The resolution grants the deviation on the basis that the added facilities will not be “significantly more visible along Highway 50 and Highway 89 after the completion of this project,” and that the cost of undergrounding would be more than five times the cost of the installing additional aerial cables.  The construction work authorized by this resolution must be completed by the end of 2007.

  • TURN Awarded Intervenor Compensation in Connection with Consumer Protection Proceeding (Item 1, adopted on consent agenda) By this decision, the Commission awards $112,764.82 in intervenor compensation to TURN in connection with TURN’s participation in the consumer protection proceeding, R.00-02-004.  This award includes costs incurred during TURN’s participation in carriers’ federal court lawsuit to challenge the previously-adopted consumer protection decision, D.04-05-057.  In response to TURN’s request for intervenor compensation, carriers opposed TURN’s proposed award, arguing that TURN should not be compensated for filing a motion to intervene that was never ruled on, and a motion to dismiss that was never filed in a short-lived federal litigation.  Although an initial draft of this decision would have denied large portions of TURN’s claim, the adopted decision largely approves intervenor compensation sought by TURN (the amount was reduced by $23,700 to account for the appropriate attorney rates.  The decision finds that “TURN’s motions to intervene and supporting briefs, and its preparatory work for a motion to dismiss, were all reasonable an appropriate under the circumstances.”  Although the carriers elected to dismiss the lawsuits in which TURN performed this work, the decision finds that this was a circumstance beyond TURN’s control, and that TURN’s otherwise “substantial contribution” should not be obviated by the carriers’ voluntary dismissals.  The decision does express concern about the amount and nature of TURN’s request, and for that reason, the Commission “strictly limit[s] [this] decision to the facts presented.”  The Commission intends to examine the appropriate treatment of litigation-related intervenor costs in the ongoing rulemaking to address intervenor compensation, R.06-04-022.

  • Customer Prevails in Complaint Against Verizon Long Distance Regarding Improper Toll Charges (Item 16, adopted on consent agenda) — This decision resolves a complaint case against Verizon Long Distance, in which a customer alleged that he should have been charged a local rate rather than a local toll rate for calls made in establishing dial-up access to the internet.  Verizon Long Distance missed the deadline for answering the complaint, and the matter was adjudicated in favor of the customer.  The customer had been given a telephone number for dial-up access that he was apparently told would generate only local charges.  When the customer incurred local toll charges instead, he asked for a new number, and a bill adjustment.  The adjustment was denied, and the customer was billed for $1,384.79 in resulting charges.  Analogizing this case to the Higginbotham case against Pacific Bell, a case where local toll calls were “mistaken” for local calls, the Commission ruled in favor of the customer.

  • Bell South Long Distance Granted Voluntary Revocation of CPCN, Res. T-17030 (Item 21, adopted on consent agenda) — This decision grants Bell South’s long distance affiliate permission to cease operations in California, and grants it authority relinquish its CPCN.  Bell South’s CPCN will be revoked as soon as all of its remaining customers are migrated to other carriers.


SIGNIFICANT HELD ITEMS

  • Decision Resolving Dispute Regarding Rule 94 of General Order 95 (Item 40, held by Bohn until 6/29 for further review) 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.

  • Legislation to Support Further Broadband Report, SB 850 (Item 48, withdrawn) This item would have called upon the Commission to take a position on SB 850, a piece of legislation that would order the submission of another report to the legislature on the state of broadband access in California.  The item was withdrawn without any indication of whether it might be considered again at some later date.


NOTES AND COMMISSIONER REPORTS

  • Consumer Protection Initiative Update — Jack Leutza provided a brief update regarding the consumer protection initiative.  He began by reporting that the augmented consumer protection budget has been approved by the Joint Legislative Budget Committee.  This will facilitate the hiring of 29.5 additional CPUC positions.  The next step will be approval by the full Legislature.  Leutza also announced that the consumer education website will be unveiled at the next Commission meeting.  Moreover, on June 26, 2006, there will be a workshop addressing “in language” issues.  The agenda for that workshop will be released on June 19, 2006.  Leutza noted that talks are ongoing between the Commission CPSD staff and the FCC enforcement staff, the California Attorney General, and the California’s various district attorneys.  Finally, a workshop to address cramming issues is now scheduled for July 12, 2006.  In response to Leutza’s report, Commissioner Grueneich inquired about efforts to work with carriers regarding improvements to the informal complaint handling process.  Leutza assured Grueneich that this process was ongoing.  Following up on the earlier discussion of SB 440, Commissioner Brown then suggested that a proviso be added to the informal consumer protection materials placing the burden of dealing with unauthorized charges on carriers.

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