On June 29, 2006, the CPUC held its regularly scheduled agenda meeting. There was a buzz in the air as the meeting began, as the audience and the Commissioners anticipated the rollout of the consumer education initiative, including the release of the new consumer education website, www.calphoneinfo.com. The Commissioners were in jovial spirits as they moved swiftly through a short but significant agenda. At the outset of the meeting, as Commissioners Grueneich and Bohn were making their typical recusal statements, Commissioner Peevey chuckled that he “hopes we don’t get to the tipping point here” (where there would not be a quorum). He added that “I’m not worried about Commissioner Brown . . ., but maybe his replacement.” Brown reassured Peevey that he wouldn’t be recusing himself, admitting that he has the “reverse midas touch.”

In addition to announcing the initiation of the consumer education effort, the Commission also issued an OIR to address the California High Cost Fund B, and resolved a longstanding dispute between Pac-West and AT&T regarding payment for ISP-bound traffic. Each of the significant telecommunications-related items on the agenda are addressed below.


  • Rulemaking Opened to Evaluate Operation of CHCF-B (Item 8, adopted on consent agenda)(Item 35, adopted 5-0) – By approving this item, the Commission initiated the long-awaited Rulemaking to review the operation of the California High Cost Fund B. The Rulemaking is designed to fulfill the mandate of SB 1276, which required the CPUC to open a proceeding to “adjust universal service rate support payments to reflect updated operating costs” and “evaluate whether universal service rate support levels can be reduced while still meeting the goals of the [CHCF-B].”

    The Rulemaking will address a variety of issues, including the following general topics: (1) whether and how to update the cost proxy model adopted in D.96-10-066; (2) whether the CHCF-B can be reduced or eliminated without compromising California’s universal service goals; (3) whether EAS payments to SureWest should be discontinued; (4) whether the Commission must observe “revenue neutrality” with respect to any changes that it makes in CHCF-B subsidy levels; (5) how to develop an appropriate “auction mechanism” to be used in designating and establishing support levels for new COLRs where the original COLR has withdrawn; and (6) how to make the administration of the CHCF-B program more efficient.

    In support of this item, Commissioner Chong observed that “universal service . . . has been the bedrock of telecom policy for over 100 years” and emphasized that this proceeding will help ensure that the goals of universal service will continue to be met while updating the CHCF-B to fit the new competitive and regulatory environment. As Commissioner Chong noted, there are many statutory requirements designed to promote universal service, and the question is “how do we continue to meet these requirements in the future decades?” According to Chong, more than half of people in a recent survey cited wireless or broadband as more important than wireline voice service. Moreover, VoIP service continues to increase in popularity. AT&T has a goal to have one million VoIP customers by the end of the year, and Skype claims to have 100 million customers internationally. Despite these developments, the Commission’s current universal service policies focus only on wireline service. Chong urged that we should not “distort the market” by continuing to subsidize only wireline service. In conclusion, Chong expressed hope that this proceeding would help “move the CHCF-B into the 21st century” and “ensure that our goals of universal service are met.” Following Chong’s comments, the Commissioners voted unanimously to support the OIR.

    This CHCF-B proceeding is the second of three proceedings to examine the CPUC’s public policy programs. The Commission has already released a Rulemaking to address the funding mechanism for the public policy funds, and to improve the administration of the ULTS, CTF, DDTP, and Payphone programs. Upon the conclusion of the CHCF-B Rulemaking, the Commission intends to release a similar OIR to address the CHCF-A.

  • Foresthill Rural Telephone Bank Loan Agreement Approved (Item 34, adopted 5-0) – This decision approves Foresthill Telephone Company’s application to enter into a loan agreement with the Rural Telephone Bank to borrow $24,901,250 to fund various system upgrades, and to replace a higher-interest interim loan that was used in the acquisition of Foresthill by Sebastian Enterprises, Inc. (“SEI”), the holding company that also owns Kerman Telephone. $14,401,000 of the loan amount is for the expansion of Foresthill’s system, and the remaining $10,500,000 will address the acquisition debt. In approving this transaction, the decision also prospectively sanctions the merger of Fortel, Inc. with Foresthill, a transaction that was already consummated as part of the SEI transaction. The decision defers consideration of whether Foresthill violated the Public Utilities Code or Commission policy by attempting to encumber its assets to secure interim financing of the acquisition debt without prior Commission approval. This issue will be addressed in a separate Commission investigation.

    Water division staff briefly introduced this item, indicating that no negative customer effects would be generated from the transaction, and that it meets all other Commission prerequisites. The Commission then approved this item unanimously, and without further coment

  • Decision Confirming that AT&T Must Pay Pac-West Reciprocal Compensation for ISP-Bound Traffic (Item 16, adopted on consent agenda) – By this decision, the Commission ruled in favor of Pac-West in its complaint against AT&T for $7,115,000 in unpaid tariff charges owed for ISP-bound traffic routed to Pac-West through Pacific Bell and Verizon tandem switches. Pac-West’s complaint alleged that it is entitled to reciprocal compensation for AT&T-originated traffic that is terminated on Pac-West’s network, in accordance with Pac-West’s intrastate tariffs. In response, AT&T argued that the FCC’s ISP Remand Order (16 FCC Rcd 9151) required ISP-bound traffic to be exchanged on a “bill and keep” basis. This decision rejects AT&T’s contention, finding that AT&T had not made the required “mirroring” offer that would trigger a “bill and keep” standard. That is, to rely on the “bill and keep” standard in the ISP Remand Order, AT&T would have to agree that it would not seek to profit from the same reciprocal compensation arbitrage scheme when it is in the carrier terminating ISP traffic. This decision directs AT&T to pay the full tariffed rates for the disputed traffic. However, the decision relieves AT&T of any responsibility for interest or late payment charges, finding that “we have no doubt that it would be inequitable to impose late charges and interest on the already-substantial sum thta AT&T owes to Pac-West.”

  • Decision to Address Revisions to Energy Utility Holding Company Rules, and G.O. 77 (Item 26, adopted 5-0) – In October 2005, the Commission issued an OIR to reexamine the affiliate transaction rules for energy companies. This decision broadens and modifies the focus of that proceeding to include a consideration of possible revisions to General Order 77. While the primary focus of the proceeding continues to be the energy utilities, G.O. 77 applies to all carriers. In particular, the Commission is considering further requiring further detail in executive compensation reports filed under G.O. 77. The proposal in the OIR would call upon utilities to report the details of compensation packages for employees making over $250,000, and to include “a statement explaining the method for determining compensation to the utility’s executive officers and employees and how that method avoids tying compensation to the profitability of the utility’s holding company.”

    Commissioner Brown introduced this item, indicating that the concerns underlying the proceeding have remained the same, but that the scope has been broadened and the schedule modified to give further consideration to the role that holding companies play in affecting competition, and to consider whether further Commission rules are needed in light of the repeal of the federal Public Utility Holding Company Act. The item was adopted 5-0

  • Decision Addressing Confidentiality Standards for Electric Procurement Data, and Interpreting Public Utilities Code Section 583 (Item 31, adopted 5-0) — In response to a legislative mandate (SB 1488), the Commission opened a proceeding to address the appropriate level of confidentiality with which electric procurement data should be handled. While this decision primarily impacts the energy sector, the decision also includes a discussion of the Commission’s approach to Public Utilities Code Section 583, the section addressing the standards for public release of data submitted to the Commission. Significantly, the decision concludes that “Section 583 does not require the Commission to afford confidential treatment to data that does not satisfy substantive requirements for such treatment created by other statutes and rules.” This states the Commission’s current policy that parties must rely on substantive grounds for confidentiality outside of Section 583 if they wish to prevent disclosure of particular documents. Rather than a “substantive right to confidential treatment,” the statute simply establishes a “process for handling information a party believes is confidential.”

  • CPCN Granted to Suneysis, Inc. to Provide Local Exchange Service in Large and Mid-sized Service Territories (Item 5, adopted on consent agenda) – This decision grants a CPCN to Suneysis, Inc. to provide full facilities-based local exchange service in AT&T, Verizon, SureWest, and Frontier service territories, and to provide interexchange service throughout California. The decision also rules on Suneysis’s request that it be granted CEQA exemptions for the lion’s share of its proposed construction. Suneysis stated that its construction “will involve the installation of fiber using existing utility poles for aerial plant or leasing space in existing conduits for underground routes,” which it asserts should “require only limited facilities-based authority and do not require CEQA review because they clearly will have no adverse effect on the environment.” The decision rejects Suneysis’s position, and instead provides a standard by which the company can demonstrate that it fits within a CEQA exemption. Specifically, before commencing construction, the company must provide the following information in support of a proposed CEQA exemption: (1) a detailed description of the proposed project; (2) a description of the environmental setting; (3) a construction workplan; (4) a statement of the claimed CEQA exemptions; and (5) documentation supporting those exemptions. The CPUC’s energy division will then rule on the requested exemptions.

  • Authority Granted to Frontier to Remote Call Forwarding Tariff (Item 10, adopted on consent agenda) – This decision approves Frontier’s request to modify the terms and conditions of its “remote call forwarding” (“RCF”) offering. The new terms and conditions are as follows: (a) Customers shall not use RCF to avoid intraLATA toll charges; (b) each RCF service allows for the forwarding of one call at a given time; (c) an additional RCF service has to be ordered by the customer in order for each additional call to be forwarded simultaneously; (d) neither Call Forwarding nor RCF service will be offered at the RCF answering location; (e) RCF is not available to make an International call.

  • Consumer Complaint Against Verizon California Dismissed for Lack of Jurisdiction (Item 25, adopted on consent agenda) – By this decision, the Commission dismissed a complaint against Verizon alleging that Verizon had intentionally disconnected the complainant’s telephone and DSL service. Since the complainant seeks tort damages rather than reparations, this complaint was dismissed as beyond the Commission’s jurisdiction.


  • Legislation Addressing Unauthorized Charges for Mobile Data and Voice Services, SB 440 (Item 55, held by Brown until 6/15 for further consideration) – This bill would adopt an assortment of requirements related to wireless services. The bill would require wireless carriers to inform customers of their potential liability for wireless charges, in the event that a customer’s wireless handset is stolen, and unauthorized charges are thereby incurred. The bill would also limit customers’ responsibility for unauthorized charges of this sort to $50. Moreover, the bill would prevent carriers from changing wireless customers to more restrictive or more expensive plans unless certain prerequisites are met.

  • Decision Resolving Dispute Regarding Rule 94 of General Order 95 (Item 27, held by Brown until 7/20 for further consideration) – 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.


  • Kickoff of Consumer Education Phase of Consumer Protection Initiative – At the outset of the meeting, the Commission announced the kickoff of the consumer education phase of the Consumer Protection Initiative. The cornerstone of this effort is the new consumer education website, www.calphoneinfo.com, which went online in advance of the meeting. The website contains five “brochures” that consumers can download, addressing five telecommunications consumer issue areas: (1) general tips regarding phone service; (2) instructions on how to read a bill; (3) tips about wireless services; (4) slamming; and (5) cramming. The site also provides “TIPS” that will rotate on a periodic basis, and a series of “Frequently Asked Questions” with corresponding answers.

    Commissioner Chong welcomed everyone to the “gala kickoff” of the consumer education phase of the consumer protection proceeding. She offered extensive praise to the Commission staff and the interested parties for the swift, thorough work in developing the content to be placed on the website, and in facilitating the creation and maintenance of the website in just a 120 day timeframe. Chong provided a demonstration of the content available on the website, noting that many parties had contributed to its development. Chong also ran the Public Service Announcement that will air on various networks in the coming weeks. That PSA will direct consumers to the website, and make them generally aware that the Commission can provide further educational materials about their telecommunications rights.

    A host of other speakers followed Commissioner Chong, each praising the Commission’s efforts in this area. Only Greenlining offered some criticisms of the process, noting that they had hoped to see a “stronger tone” in the website content, and that they had hoped the website would directly encourage consumers to file complaints. AT&T, CTIA, and each of the remaining Commissioners praised Commissioner Chong for her leadership on this effort, and looked forward to further developments as the consumer education initiative moves on.

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