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On Friday, November 21, 2008, the California Public Utilities Commission held its regularly-scheduled agenda meeting. The Commission adopted a resolution providing funding from the California Advanced Services Fund for six broadband projects in unserved areas and granted approval for the CPUC staff to file comments in response to the FCC’s Further Notice of Proposed Rulemaking addressing intercarrier compensation, universal service reform, and the treatment of IP-enabled services. These and other telecommunications-related items addressed during the meeting are summarized below.


REGULAR AND CONSENT AGENDA ITEMS

  • Resolution Providing CASF Funding for Broadband Projects in Unserved Areas Adopted, Resolution T-17182 (Item 47, adopted 5-0) – The Commission adopted Resolution T-17182, which provides $372,976 in California Advanced Services Fund funding for six broadband projects in unserved areas. This is the first grant under the CASF, which was initiated in December 2007 as a means to promote broadband deployment in “unserved” and “underserved” areas. The program provides matching funds of up to 40% for qualifying broadband projects. In its first round of filings addressing requests to serve “unserved” areas, the Commission received twenty-three project proposals. Sixteen of those were challenged as not being in qualifying “unserved” areas, and one was dismissed because the applicant did not have a valid CPCN. The remaining six projects are to be funded pursuant to the resolution.

    Robert Wullenjohn from the Communications Division introduced the resolution and provided some statistical background. On average, the total cost per customer of the six projects is $288. Mr. Wullenjohn stressed the importance of the fund in extending the reach of broadband to these previously unserved areas. He emphasized that the high cost of installation makes projects in such areas more expensive, so carriers would not be likely to initiate such endeavors on their own. According to Mr. Wullenjohn, the projects would only have a positive net present value with the 40% matching funds.

    Commissioner Chong commended the Commission staff on its swift work in this proceeding, moving from the initiating decision to the first grant resolution in a little under a year, a feat which she noted as “considered lightning speed.” Commissioner Chong also expressed pleasure that 1,300 people who were not served before would now have broadband access, but she cautioned that this shows “how very complex it is to fill the gaps” in the service areas. She noted that the Commission is still accepting project applications and still has plenty of funds available. Commissioner Grueneich inquired as to how many people are currently without broadband, seeking to get a sense of what percentage of the total need these six projects would serve. Commissioner Chong replied that there are currently 1.4 million people without broadband access in California. Commissioner Peevey observed that this was “very important for California as it goes forth in an ever more technologically important world.” A recent draft of the resolution can be found at the following link: http://docs.cpuc.ca.gov/word_pdf/AGENDA_RESOLUTION/94034.doc.

  • Decision Approved to File Comments in Response to FCC’s Further Notice of Proposed Rulemaking Addressing Intercarrier Compensation, Reform of High-Cost Universal Service Support, and Classification of IP-Enabled Traffic (Item 49, adopted 5-0) – On November 5, 2008, the FCC adopted a Further Notice of Proposed Rulemaking classifying IP-enabled services as “information services” and proposing sweeping changes to the federal universal service program and the intercarrier compensation system. With comments due by November 26, the Commission staff did not have time to review all of the proposed changes, but the Staff did seek permission to file comments on several specific issues. Assistant General Counsel Helen Mickiewicz introduced the CPUC staff recommendations, noting that the Commission would start by repeating comments that it had made at the FCC on similar issues.

    First and foremost, staff recommended opposing the classification of interconnected IP-enabled services as “information services.” Staff believes that interconnected VoIP offerings should be considered “telecommunications services” under the FCC’s regulatory framework. In regards to universal service support, Commission staff recommended against the FCC’s proposed permanent, across-the-board cap on high cost support. One clarification that staff sought related to the FCC’s proposal to change the universal service contribution method for both business and residential customers. Commission staff questioned where this would leave wireless carriers, who typically identify themselves with neither of those two service categories.

    During comments on the recommendations, Commissioner Chong emphasized the need to address the state of the Universal Service Fund. Commissioner Bohn focused his questions on the classification of IP-enabled services as “information services” and what effect this might have on the Commission’s ability to protect end-user customers. When Ms. Mickiewicz informed him that the federal regulation would likely pre-empt state law and limit consumer protection, Commissioner Bohn requested that the Commission’s comments to the FCC be “more forceful” in their opposition to this outcome. Ms. Mickiewicz gladly agreed, adding that staff had merely been waiting for the Commission’s “blessing.” Commissioner Chong jumped in, offering the clarification that the FCC’s action might or might not preempt state action. Several of the Commissioners expressed doubt that the Further Notice would actually be considered as planned at the FCC’s open meeting on December 18. Following these comments, the Commissioners approved the staff’s proposed comments.

  • Decision Approved Granting Request to Port-in to California a Kentucky Interconnection Agreement (Item 11, adopted on consent agenda) – The Commission granted, subject to certain limitations, the request of Sprint and Nextel to “port-in” to California an interconnection agreement approved by the Kentucky Public Service Commission. The “port-in process” was created by the FCC and accepted by AT&T as a condition of its merger with BellSouth. The decision approved all of the Kentucky agreement except its bill-and-keep and facility sharing provisions, which it found constituted state-specific pricing that is expressly excluded from the porting requirement. A recent copy of the proposed decision granting approval is available at the following link: http://docs.cpuc.ca.gov/word_pdf/AGENDA_DECISION/93761.doc.

  • Decision Extending Statutory Deadline in CommPartners v. AT&T Adopted (Item 27, adopted on consent agenda) – CommPartners filed this case seeking declaratory relief that AT&T failed to negotiate an interconnection agreement amendment in good faith in violation of Section 251(c)(1) of the Telecommunications Act of 1996, thereby discriminating against CommPartners. The 12-month statutory deadline for resolution of this case is set to expire on January 14, 2009. Due to the complexity of the issues involved, the Commission adopted a decision extending the deadline by ninety days. A recent draft of the decision is available at the following link: http://docs.cpuc.ca.gov/word_pdf/AGENDA_DECISION/93188.doc.


SIGNIFICANT HELD ITEMS

  • Proposed Decision Designating ConnectTo as an ETC in California (Item 10, held by Staff until 12/4) – This proposed decision would grant ConnectTo Communications, Inc.’s request to be designated as an Eligible Telecommunications Carrier (“ETC”) in the territories of AT&T, Verizon, SureWest, and Frontier for LifeLine purposes only. The decision had originally rejected the request, but the Communications Division staff reversed its opinion after receiving an Advice Letter from ConnectTo addressing the concerns. The decision is notable in that it would make ConnectTo the first ETC to receive federal subsidies for the LifeLine program only. A recent draft of the proposed decision can be found at the following link: http://docs.cpuc.ca.gov/word_pdf/AGENDA_RESOLUTION/93578.doc.

  • Proposed Decisions Regarding Transaction between Warburg Pincus, Electric Lightwave (ELI), and Eschelon Telecom (Items 46/46a, held by Bohn until 12/4) – The proposed decision would approve prospectively a transaction in which Warburg Pincus Private Equity X acquires an indirect control of ELI and Eschelon. However, the proposed decision would deny a request to approve the transaction on a retroactive basis and a separate request to dismiss the application on the grounds that the transaction did not result in a transfer of control under Public Utilities Code Section 854. Despite the finding of violation of Section 854 due to the parties having finalized the transaction without the Commission’s advance approval, the proposed decision imposes no fines because of the unique circumstances of the case. A recent draft of the proposed decision is available at the following link: http://www.cpuc.ca.gov/EFILE/PD/86841.pdf.

    The alternate proposed decision of Commissioner Peevey in this matter would grant the request to dismiss the application for approval of a transfer of control. Describing the circumstances as a close call, the alternate decision would find that Section 854 does not apply to the transaction. Since the Commission has not previously determined whether to view stock transfers on a fully diluted or non-diluted basis, the alternate decision does not take this factor into account. Looking at other factors of control, the alternate decision would find that no transfer of control has occurred. Alternatively, even if Section 854 were to apply, the alternate decision would use the Commission’s authority under Section 853(b) to dismiss the application. Section 853(b) allows the Commission to forebear application of Section 854 if it finds that Section 854’s requirements are not necessary in the public interest. A recent draft of the alternate decision may be found at this link: http://docs.cpuc.ca.gov/word_pdf/AGENDA_DECISION/93542.doc.

  • Proposed Decisions Ordering Termination Fees from Various Carriers to Pac-West Telecomm (Items 3, 4, and 5, held by Staff until 12/4) – These three proposed decisions would order three different carriers to pay Pac-West unpaid call termination fees. The carriers and the amounts they would owe are: Blue Casa Communications, $309,348.65; Telscape Communications, $554,605.39; and Comcast, $379,446.43. The proposed decisions may be found at the following links:

  • Proposed Decision Granting Transfer of Control from Lightyear to Wherify (Item 9, held by Simon until 12/4 for further review) – The proposed decision would grant the request for approval of the indirect transfer of control of Lightyear to Wherify. Applicants state that the proposed transaction will enable Lightyear to obtain access to additional financial resources to strengthen its competitive position in California. A recent version of the proposed decision is available here: http://docs.cpuc.ca.gov/word_pdf/AGENDA_DECISION/92585.doc.

  • Proposed Resolution Designating TracFone Wireless as an ETC (Item 12, held by Staff until 12/4) – This proposed resolution would grant the request of TracFone to be designated as an Eligible Telecommunications Carrier (“ETC”) for the limited purpose of offering Federal LifeLine and Link-Up Service. This is the second such request in California, in addition to the request from ConnectTo, as discussed above. A recent draft of the draft resolution may be reached by clicking on the following link: http://docs.cpuc.ca.gov/word_pdf/COMMENT_RESOLUTION/92267.doc.


NOTES AND COMMISSIONER REPORTS

  • NARUC Conference – Several of the Commissioners discussed their experiences at the recent 120th Annual Conference of the National Association of Regulatory Utility Commissioners (“NARUC”), which was held in New Orleans from November 16-19. Commissioner Simon in particular was moved by the devastation that still remains, more than three years after Hurricane Katrina. He also spoke about the Gas Committee on which he serves, which will be presenting to Congress a paper suggesting the implementation of a “czar” to oversee the commodities market and hopefully prevent speculators from causing spikes in the marketplace. Commissioner Bohn happily reported that “water has become fashionable,” as the Water Committee at the Conference had standing room only capacity.

  • California Telehealth Network to Open Bidding for Carriers – Commissioner Chong provided an update on the California Telehealth Network’s issuance of a Request for Proposals for carriers to provide broadband services to the network. Originally set for mid to late October, the RFP was delayed, but should be posted next week at the latest. Further information is available at www.caltelehealth.org.

  • Website Revamping – At the very end of the meeting, Commissioner Chong called upon the Commission staff to brainstorm regarding changes that can be made to facilitate the finding of useful information on the Commission’s web site.

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