On October 15, 2009, the California Public Utilities Commission held its regularly scheduled agenda meeting. On the Commission’s regular agenda, the Commissioners debated whether to fine AT&T nearly $1 million in conjunction with improper local Zone Usage Measurement (ZUM) rate increases it had imposed back in 2008 through a Tier 1 advice letter, eventually deciding not to impose the fine. In a Commissioner report, Commissioner Chong noted that Governor Schwarzenegger submitted California’s letter to NTIA in connection with ARRA broadband funding applications on October 14. These and other telecommunications items of interest on the Commission’s agenda are discussed in further detail below.
REGULAR AND CONSENT AGENDA ITEMS
- Rejection of AT&T California’s Advice Letter Requesting Authority to Increase Measured Rate Usage Rates (Item 9, adopted 5-0 on regular agenda) – In a 2008 Tier 1 Advice Letter, AT&T California (AT&T) requested authority to increase measured usage rates for local Zone Usage Measurement Zones (ZUM) 1, 2 and 3 calls. In reliance on the Tier 1 advice letter rules, AT&T implemented this rate increase three days after the advice letter was filed. The CPUC’s Communications Division (CD) rejected that requested increase as inconsistent with the basic service price freeze instituted in the Uniform Regulatory Framework proceeding and codified in DIVCA (See Public Utilities Code Section 5950). AT&T ultimately reversed rate increases it had imposed on customers concurrently with the filing of its Advice Letter. This Resolution directs AT&T to fully refund to customers all amounts charged in connection with the improper rate increase. To the extent that AT&T fails to honor this directive, the Resolution states that the Commission will consider further penalties against AT&T. However, the Resolution fails to impose any penalties at this time. In evaluating this item, the Commissioners were divided as to whether the Resolution should have penalized AT&T. Commissioners Bohn and Grueneich initially believed that the decision may not go far enough in that it does not penalize AT&T for violation of CPUC rules. Commissioners Simon and Chong argued that a fine was inappropriate given the lack of clarity as to whether or not the ZUM increases were intended to be included in the basic residential service rate freeze. Ultimately, the Commissioners supported the Resolution unanimously, with Bohn and Grueneich reserving the right to concur. This Resolution directs AT&T to complete the required customer refunds within 30 days. The Draft Resolution associated with this item is available at: http://docs.cpuc.ca.gov/word_pdf/AGENDA_RESOLUTION/108345.doc.
- Resolution Approving a California High Cost Fund-B Surcharge Rate Increase from .25% to .45% (Item 50, adopted on consent agenda) – This Resolution increases the California High Cost Fund B (CHCF-B) surcharge from .25% to .45%, effective December 1, 2009. The CHCF-B has declined by approximately $137,000,000 last year due to changes in the CHCF-B program, an erosion of the funding base, and budgetary issues necessitating a loan from the CHCF-B to the state’s general fund. In light of these developments, the CD recommended that the surcharge rate be increased to allow the CHCF-B fund to have sufficient revenues to cover program expenditures while providing an adequate reserve. The Draft Resolution associated with this item is available at: http://docs.cpuc.ca.gov/word_pdf/AGENDA_RESOLUTION/108141.doc.
- CPUC Comments to FCC Regarding Analysis of Wireless Markets (Item 53, adopted on consent agenda) – This Decision authorizes the CPUC’s Legal Division to offer reply comments in the Federal Communications Commission (FCC)’s examination of whether and how to expand and enhance its analysis of competitive conditions in the wireless communications market. The FCC has requested comments on which analytic framework and data sources most clearly describe competition in that market. The FCC is also requesting comment regarding the impact of new market segments not covered in previous reports on competitive conditions in the wireless industry, as well as an analysis of vertical relationships between “upstream” and “downstream” market segments. In a report underlying this item, the CPUC’s Legal Division has recommended that CPUC focus on the proper analytic framework for evaluation of market competition and on what data should be given weight in that evaluation. The CPUC’s comments support the FCC’s expansion of the mobile wireless competition inquiry beyond the Commercial Mobile Radio Services market, and support three prongs of the FCC’s current market condition analysis framework: (1) market structure; (2) provider conduct; and (3) market performance. However, the CPUC believes that the “consumer behavior” prong of the current framework is unnecessary for the evaluation. The Legal Division would also have the FCC consider further data regarding market share, including market share by service type, intermodal market share, market share by wholesale and retail service types, evaluation of horizontal integration, current frequency allocations and utilization, and backhaul ownership for all facility types. Finally, the CPUC comments ask the FCC to review how exclusive handset contracts affect competition. These reply comments were presented to the FCC on the same day as the CPUC’s meeting, on October 15, 2009. The Draft Memorandum containing the Legal Division recommendations, as described herein, is available at: http://docs.cpuc.ca.gov/word_pdf/REPORT/108178.doc.
- Decision Resolving Outstanding Issues in Cingular Wireless Investigation (Item 4, adopted 5-0 on regular agenda) – In D.04-09-062, the CPUC fined Cingular Wireless (Cingular) $12.14 million for unlawful early termination fee policies and other corporate practices. Cingular was also ordered to pay reparations of $18,467,220.38 to affected customers, with any unpaid reparations to be distributed to the State of California General Fund. Following extensive litigation, Cingular (now known as AT&T Mobility (AT&T Mobility), the Utility Consumers Action Network (UCAN), and the Commission’s Consumer Protection and Safety Division (CPSD) entered into an all-party settlement resolving the litigation, by which Cingular was required to pay the $12.4 million penalty as well as customer reparations through two different funds. This Decision resolves all issues related to this proceeding and closes the reparations funds by: (1) revising the initial decision requiring payment of a second intervenor compensation award to UCAN because that amount was previously paid to UCAN directly; (2) refunding to AT&T Mobility the balance remaining on the original amount deposited for notice and claims administration; and (3) distributing the residual balance of $1.9 million in the two reparations funds to the CPUC’s Telecommunications Consumer Protection Fund. The Proposed Decision associated with this item is available at: http://docs.cpuc.ca.gov/word_pdf/AGENDA_DECISION/107567.doc.
- CVT Prepaid Solutions, Inc. Application for Registration as an Interexchange Carrier Withdrawn and Dismissed (Item 12, adopted on consent agenda) – CVT Prepaid Solutions, Inc. (CVT) applied for a certificate of public convenience and necessity (CPCN) to provide inter-LATA and intra-LATA services in California as a non-dominant interexchange carrier, but then requested withdrawal of the application after a transfer of all of its assets related to the provision of prepaid calling services to a former affiliate, STi Prepaid, LLC. The CPUC’s Consumer Protection and Safety Division (CPSD) had protested the application on the grounds that CVT had apparently been operating without authority in California prior to its application. CPSD also alleged that CVT had failed to disclose a Florida Attorney General settlement of a deceptive advertising claim, and a bankruptcy associated with Orion Telecommunications, one of CVT’s “former incarnations.” At the request of the applicant, the CPUC dismissed the application and placed restrictions on future applications – that CVT and any of its current directors, officers or owners of more than 10% of outstanding shares will be required to reference this application, the CPSD’s protest of the application, and this Decision in any future applications for authorization to provide telecommunications service in California. The Proposed Decision associated with this item is available at: http://docs.cpuc.ca.gov/word_pdf/AGENDA_DECISION/108296.doc.
- Approval of Funds to Conduct CEQA Review of Indian Springs School District Project for Rural Telecommunications Infrastructure Grant Program (Item 18, adopted on consent agenda) – This Resolution authorizes the CPUC to enter into a contract for California Environmental Quality Act (CEQA) review of the Indian Springs Rural Telecommunications Infrastructure Grant Program project for an estimated cost of $327,000. The Rural Telecommunication Infrastructure Grant Program provides grants of up to $5 million per project for the construction of telecommunications infrastructure projects to serve low-income, rural communities currently without telephone service. The Indian Springs Project involves the construction of three cell towers to be constructed along California State Route 299 in Shasta County, for residents and commuters within the coverage area of Hatchet Mountain, Round Mountain, and Bear Mountain. The Draft Resolution associated with this item is available at: http://docs.cpuc.ca.gov/word_pdf/AGENDA_RESOLUTION/108235.doc.
- Approval of Kings United Way for Certification as 2-1-1 Service Provider for Kings County (Item 28, adopted on consent agenda) – By this Resolution, the CPUC grants Kings United Way authority to provide 2-1-1 Information and Referral (I&R) services to all of Kings County for an indefinite term. Kings United Way is a California non-profit that applied for authority to provide 2-1-1 services in Kings County, and which was endorsed by the Kings County Board of Supervisors. 2-1-1 is the national dialing code to be used to phone non-emergency community I&R providers. Upon dialing 2-1-1, callers are routed to a referral service and agency that provides information concerning social services such as housing assistance, utility bills assistance, food assistance, and other non-urgent situations currently unaddressed by either 9-1-1 or 3-1-1 services. The Draft Resolution associated with this item is available at: http://docs.cpuc.ca.gov/word_pdf/AGENDA_RESOLUTION/107177.doc.
- Order Extending Statutory Deadline in Proceeding Considering Changes to CPUC’s Application of CEQA to Telecommunications Utilities (R.06-10-006) (Item 36, adopted on consent agenda) – This Decision extends the statutory deadline for the Commission’s consideration of CEQA reform in R.06-10-006 until December 17, 2009. In R.06-10-006, the Commission is evaluating changes to the CPUC’s application of CEQA to telecommunications utilities under its jurisdiction. As part of that inquiry, the Commission intends to develop rules and policies that will: (1) ensure that CPUC practices comply with current CEQA requirements and policies; (2) promote the development of an advanced telecommunications infrastructure, particularly as it applies to broadband facilities; and (3) ensure that application of CEQA in the telecommunications field does not cause undue harm to competition. Given the complexity of the issues in this rulemaking, this Decision extends the current statutory deadline of October 18, 2009 to December 17, 2009. The Proposed Decision associated with this item is available at: http://docs.cpuc.ca.gov/word_pdf/AGENDA_DECISION/107847.doc.
SIGNIFICANT HELD AND WITHDRAWN ITEMS
- Determination of Gain on Sale Treatment for Rural Telephone Bank Stock Dissolution Proceeds (Item 19, held to 10/29/09 by Staff) In 2007, the Small LECs sought a determination of any “gains on sale” associated with the Rural Telephone Bank (RTB) stock redemption proceeds the Small LECs had received as a result of the dissolution of the RTB. The Proposed Decision would allocate all gains derived from the RTB stock redemption to ratepayers even though the vast majority of the stock was never placed in rate base. In addition, the Proposed Decision would depart from the “gain on sale” doctrine by allocating the principal shareholder investments in the RTB to ratepayers. The Proposed Decision was held, and may be withdrawn in light of the recent ALJ Ruling in this proceeding reopening the record. The Proposed Decision associated with this item is available at: http://docs.cpuc.ca.gov/EFILE/PD/107001.pdf.
- Draft Resolution Approving CASF Funding for Mother Lode Broadband Project in Alpine, Amador, Calaveras, Tuolumne and Mariposa Counties (Item 51, held to 11/20/09 by Staff) – This Draft Resolution would approve $3,110,064 in funding for the Mother Lode Broadband joint project of Telenational Communications Inc. (a provider of interLATA and intra LATA services in California), Rapid Link Inc. (a national voice and data carrier) and Mother Lode Internet (an internet service provider in Southern and Central California) to serve approximately 17,481 households in “underserved” areas in Tuolumne, Calaveras, Amador, Alpine and Mariposa counties. The Draft Resolution associated with /this item is available at: http://docs.cpuc.ca.gov/word_pdf/COMMENT_RESOLUTION/107032.doc.
- Proposed Decision Addressing ADMA Telecom, Inc. Application for Certificate of Public Convenience and Necessity to Provide Switchless Resold Local Exchange and Interexchange Services (Item 10, held to 10/29/09 by Staff) – ADMA Telecom, Inc. (ADMA) is a Florida corporation offering prepaid calling card services. It applied to operate as a switchless local and interexchange carrier telephone corporation in California. This Proposed Decision would find that ADMA met the requirements for registration, and grant ADMA’s request for a CPCN to provide local exchange service in the service territories of Pacific Telephone Company, Verizon California, Inc., SureWest Telephone Company, and Citizens Telecommunications Company of California, Inc., as well as interexchange telecommunications services within California. The Proposed Decision associated with this item is available at: http://docs.cpuc.ca.gov/EFILE/PD/106429.pdf.
2009 LEGISLATIVE UPDATE
Pamela Loomis, Director of the CPUC’s Office of Governmental Affairs, provided an additional update on the telecommunications matters, with particular attention to two significant telecommunications bills recently signed by Governor Schwarzenegger: AB 1553 and AB 1555. As reported in our last update, AB 1553 (Fuentes) extends the statutory termination date associated with the Deaf and Disabled Telecommunications Program (DDTP) until January 1, 2014, thereby avoiding termination of the funding mechanism for the program on January 1, 2010. AB 1555 (Perez, Fuentes) allows any entities eligible for stimulus funding under the American Recovery and Reinvestment Act of 2009 to obtain “matching” grants from the California Advanced Services Fund to pair with stimulus grants. Links to the chaptered versions of these bills are provided below: