On October 5, 2006, the CPUC held its regularly-scheduled agenda meeting. The meeting featured several telecommunications-related items, including a new rulemaking to address video franchising issues, and another to address CEQA reform. The Commission also directed staff to file comments on the FCC’s Missoula Plan, and reached a final decision regarding CLEC customer mass migration guidelines. Further information regarding these and other significant telecommunications-related items is provided below.


  • OIR Opened to Implement Digital Infrastructure and Video Competition Act, AB 2987 (Item 48, adopted 5-0) – As had been promised in previous meetings, the Commission opened a proceeding to implement AB 2987, the recent legislation designed to increase competition for video and broadband services by providing for the issuance of statewide video franchises, and by streamlining the conditions under which competitive video providers can offer service. Significantly, AB 2987 designated the Commission as the entity responsible for issuing and overseeing statewide franchises. This rulemaking will establish the procedures for providers to apply for video franchises, and will implement other directives outlined in the legislation.

    Commissioner Chong introduced this item by observing that the Governor signed AB 2987 into law last Thursday, and that the law will go into effect on January 1, 2007. As Chong noted, the statewide video franchising scheme will replace the current system, which relies on local municipalities to perform the video franchising function. Given the prompt issuance of this rulemaking, Chong expressed optimism that the Commission would be able to have the necessary procedures in place by January 1, 2007 effective date. Chong briefly summarized the contents of the Order Instituting Rulemaking. It includes a description of the underlying legislation, a preliminary scoping memo for the proceeding, a proposed General Order governing the franchise application process and the administration of the franchises, a proposed application form, and a model of a franchise certificate. Following some laudatory comments from Commissioner Peevey regarding the hard work that allowed this OIR to be prepared in a timely manner, the item was adopted 5-0.

    In the Scoping Memo, the Commission identifies four issue areas that will be addressed in the proceeding. First, the Commission will define the scope of its delegated authority based on an analysis of AB 2987. Second, the Commission will adopt a general order to clarify the procedures under which a statewide franchise can be sought, and to identify the mechanisms under which such a franchise will be administered. Third, complaint and enforcement procedures will be put in place to address grievances by local entities against state video franchise holders. Fourth, the Commission will adopt a methodology for calculating the user fee that statewide franchisees will pay to the Commission to compensate the Commission for the costs of this program.

    The OIR will be served on carriers, cable companies, and California’s municipal franchising authorities. Opening comments on the OIR will be due on October 25, 2006, with replies to follow on November 1, 2006.

  • Procedures Adopted Governing Mass Customer Migrations from Exiting CLECs (Item 47, adopted 5-0) – This decision adopts “mass migration guidelines” to facilitate the transfer of customers from exiting CLECs to other carriers. This decision concludes the CLEC migration proceeding (R.03-06-020), which began as the result of a Verizon petition for rulemaking on the subject. Where a CLEC files an application to exit the market, the preferred outcome will be to transfer the CLEC’s customers to the carrier of their choice. If they do not make a choice, they will be assigned to an “arranged carrier,” if the exiting CLEC has made arrangements with another carrier, or to a Commission-assigned “default carrier,” if no arranged carrier has been identified. Attachment A to the decision contains the mass migration guidelines, which establish notice procedures and timetables for these customer transfers. The guidelines also address the selection and compensation of default carriers.

    Commissioner Peevey introduced this item, emphasizing that a key goal of this decision is to ensure that customers of exiting CLECs do not lose voice service. While this decision generally accomplishes that goal, Peevey acknowledged that “there are certain customer groups that may be at risk for possible interruptions of service.” This could occur where the exiting CLEC is the only carrier that has available facilities to serve the customers. In this instance, the CLEC exit proceeding will deal with the issue on a case-by-case basis. Without extensive discussion, this item was passed unanimously.

  • New CEQA Rulemaking Initiated (Item 49, adopted 5-0) – Having recently defeated a proposal by Commissioner Brown to reform the Commission’s approach to CEQA review, the Commission voted to open a proceeding to open a new rulemaking to examine ways to streamline its procedures for complying with CEQA on telecommunications projects. This proceeding replaces the previously-initiated CEQA proceeding, R.00-02-003. The new proceeding seeks to end the uncertainty associated with CEQA compliance by “developing clear, pragmatic and effective policies, programs and requirements for complying with the Commission’s obligations under CEQA.”

    In addition to ensuring that CEQA is followed, the Commission also intends to ensure that its policies will “promote the development of an advanced telecommunications infrastructure” and “not cause undue harm to competition.” The OIR will examine a variety of policy options, including: (1) whether to adopt a “multi-level approach” to CEQA that will apply greater scrutiny to projects that are more likely to harm the environment, while applying less scrutiny to other projects; (2) whether a CEQA regime similar to the cellular siting processes in G.O. 159 could be adapted to apply to all CEQA projects; (3) whether statutory and categorical exemptions could be utilized to streamline CEQA review; and (4) whether to use a Master Environmental Impact Report for CEQA review, since this could avoid the duplication and delay that would otherwise result from reviewing each individual project. The rulemaking will also evaluate how CEQA responsibilities intersect with the Commission’s video franchising responsibilities implemented under AB 2987.

    Commissioner Bohn introduced this item, emphasizing that the Commission’s application of CEQA must be “workable for, and recognize the unique characteristics of, the telecommunications industry.” Bohn noted that telecommunications infrastructure is “vital to the economy” and that “plays an increasingly important role in the social fabric of our communities.” He championed the cause of competition, stating that it has brought significant benefits to the state. Bohn acknowledged that the previous CEQA proceeding had been pending since February of 2000. While the Commission was unable to resolve the issues in that proceeding, the “issues did not go away.” Bohn lamented the lack of clarity regarding the application of CEQA, and promised to rectify this problem. Specifically, Bohn noted his concern that the uncertainty surrounding CEQA has “deterred investment” and “hindered the development of advanced telecommunications services.” Bohn encouraged parties to be “active and engaged” in this proceeding, and called upon a wide range of parties to participate.

    The Commission supported the initiation of this proceeding by a 5-0 vote. Opening comments on the OIR are due on November 9, 2006, with replies to follow on November 21, 2006.

  • CPUC Will Offer Comments on Missoula Plan (Item 54, adopted 5-0) – This item authorized CPUC staff to provide comments on the Missoula Plan, as called for in the FCC’s intercarrier compensation docket, CC Docket No. 01-92. The CPUC’s comments will identify areas in which the CPUC believes that the Missoula Plan can be refined. While this item grants general authority to the CPUC to offer comments on the Missoula Plan, the specific points to be addressed in those comments will be the subject of further discussions within the Commission. The staff will provide a further presentation of the issues at the next Commission meeting for the Commissioners’ consideration.

    The discussion on this item focused on a legal division memorandum, which outlines the CPUC’s position relative to the Missoula Plan. Gretchen Dumas of legal division introduced this item, while recognizing the contributions of Faline Fua, Victor Banuelos, and other CPUC staff members to the memorandum. Ms. Dumas summarized the proposed comments, stating that “basically, we want to refine the plan and make it more workable.” Dumas emphasized that an effective intercarrier compensation regime must “balance financial burdens for transport between carriers in the new competitive environment” and “facilitate a smooth transition from circuit-switched to an IP/broadband/VoIP world.” Dumas then described some of the salient aspects of the Missoula Plan, and noted some ways in which it would impact California. She described the three “tracks” that would be implemented under the Missoula Plan, and described the changes that will occur for the Subscriber Line Charges (SLC), and summarized the operation of the “restructure mechanism.”

    Dumas then briefly summarized nine areas for possible comment on the Missoula Plan, as provided in the legal division memorandum. The staff proposes the following comments on the Missoula Plan: (1) a methodology should be developed to allocate a portion of the SLC increases and the restructure mechanism to intrastate revenues, in order to prevent further erosion of the funding base for California’s public policy programs; (2) some flexibility should be granted to the states to implement intrastate rate changes, so that the states will have the discretion to “move faster than the Missoula Plan” if they choose; (3) the FCC should consider whether state-adopted TELRIC-based UNE rates would be a more appropriate unified rate for Track 1 carriers; (4) further clarification should be provided regarding the appropriate size of the early adopter fund, and the manner in which it would be funded; (5) existing rules defining the study areas for High Cost Loop Fund support should be retained; (6) the Missoula Plan approach to solving the Phantom Traffic problem should be adopted; (7) revenue neutrality principles should be adjusted to ensure that carriers cannot recover revenues in excess of their losses; (8) the restructure mechanism should be modified to reflect trends regarding declining minutes of use; and (9) there should be no automatic rate increases in the SLC.

    Following the summary from Ms. Dumas, the Commissioners began to grapple with some of the issues raised in the staff memorandum. Commissioner Chong emphasized that “it is very important that California comment” in this docket. She reminded her fellow Commissioners that this is a controversial proposal, and that there are other proposals under consideration. Chong underscored the importance of resolving this issue as the telecommunications market becomes more competitive, since some carriers are taking advantage of arbitrage associated with “price differentials” leading to “unbalanced exchanges” in traffic. Chong noted that “there are lots of concerns about the plan for California” that should generate vigorous comments at the FCC.

    Chuckling at the complexity of the issues involved, Commissioner Brown quipped that “this is a subject that most regulators run away from,” confessing that his knowledge of this subject is “like a snowflake” in that it exists for a moment, and then it disappears. Brown agreed that it was important to comment on this item, but expressed a belief that “we should try to come together on a consensus as to what to say” before giving the staff carte blanche to draft comments. Commissioner Bohn echoed Brown’s sentiments, reflecting that this issue “is both history and mythology wrapped into technology.”

    Commissioner Peevey offered some “bottom line” comments regarding the Missoula Plan, suggesting that “AT&T has negotiated this with a group of rural carriers” in a manner that will effectuate a “transference of wealth” to some states relative to others. Peevey described this plan as likely to benefit “Iowa and Kansas” rather than California. Chong mitigated this characterization to some extent, portraying California as a “mixed state.” Brown chimed in, interjecting that it “depends on whether you live on the coast or in the valley.”

    To balance the need for further detail regarding the staff recommendations, and the need to file timely comments on this issue with the FCC, Commissioner Peevey proposed that the Commission approve this item, but that the staff should return at the next meeting to provide further details regarding the proposed comments. In the interim, the staff will be meeting with the various Commissioner offices to further explain the specifics in the legal division memorandum. As framed by Commissioner Peevey, this item was adopted 5-0.

  • Verizon Granted Authority to Utilize Previously Approved Shared Asset Methodology to Transactions with other Verizon Affiliates (Item 6, adopted on consent agenda) – In a previous Commission decision, the Commission approved a specific methodology for allocating the costs of shared assets between Verizon and various Verizon affiliates. That decision also provided that Verizon would not need to apply for 851 approval in connection with future transactions for office space and equipment involving those affiliates, provided that the transactions meet the requirements of General Order 69-C (which exempts “license” agreements from Section 851 requirements). This decision grants Verizon authority to apply the same asset allocation methodology to a new set of corporate affiliates, and offers the same Section 851 amnesty to transactions between Verizon and those affiliates. Verizon will be permitted to extend these findings to any “affiliates that exist solely to provide services to members of the carrier’s corporate family,” provided that the transactions with these entities satisfy the standards in G.O. 69-C. The decision requires that Verizon file annual year-end assessment and adjustment documentation reflecting transactions for which the shared assets methodology was employed.

  • Complaint Dismissed Against AT&T For Alleged Improper Rating of ISP-Bound Calls (Item 9, adopted on consent agenda) – This decision dismisses a complaint by a customer against AT&T, on the grounds that the Commission did not have the jurisdiction to award the consequential damages that the customer was seeking. The customer alleged that calls to her Internet Service Provider that were originally local calls were re-rated to be toll calls. The customer sought $1000 in damages, even though the total disputed charges were only $110.00. Since AT&T refunded the disputed amount, plus interest, this matter was dismissed.

  • TURN Granted Intervenor Compensation for Participation in NRF Review Proceeding (Item 14, adopted on consent agenda) – This decision awards $134,386.44 in intervenor compensation to TURN in connection with TURN’s contributions to the decision resolving petitions for modification in the NRF proceeding, and the decision closing the NRF proceeding in light of URF.

  • Settlement Reached in UCAN Dispute with Sprint Regarding Charges for Commercial Text Messages (Item 15, adopted on consent agenda) – This decision resolves a complaint by UCAN against Sprint in connection with Sprint’s alleged practice of charging customers for advertisements sent to wireless devices via text message. UCAN had alleged that Sprint was billing customers for these text messages, in violation of California law, including Public Utilities Code Section 2890. The parties agreed to a settlement, by which Sprint will any customer charges for these text messages, and will discontinue the practice going forward.

  • Complaint Against AT&T for Excessive Local Toll Charges Dismissed ((Item 16, adopted on consent agenda) – This decision resolves a customer complaint against AT&T for toll charges that the customer alleged were excessive and unauthorized. The customer used a dial-up connection to connect to Earthlink, who the customer used as his Internet Service Provider. When the customer upgraded his dial-up modem, and a third party redirected his equipment to a number that generated local toll charges. This generated a monthly bill of more than $1500, which the customer disputed, alleging that the frequency and duration of the dial-up calls was improper. Since there is no indication of any wrongdoing by AT&T, this decision dismisses the complaint. However, the decision urges AT&T to accept a compromise on the bill of approximately $500, and suggest that the customer call his Internet Service Provider to investigate the peculiarities regarding the frequency and duration of the calls.


  • Decision Addressing Petitions for Modification of Decision Resolving Triennial Review Order Proceeding (Item 46, Held by Chong until 10/19 for further review) – This item would resolve Petitions for Modification filed by Verizon and SBC with respect to the decision concluding the Triennial Review Order, 9-month phase. In particular, the large ILECs seek to reverse the requirement that batch hot cut process and pricing disputes be submitted to arbitration. The draft decision in this case would defer these issues to a pair of pre-hearing conferences in the consolidated arbitration proceedings for Verizon and SBC.

  • Possible CPUC Comments on Jurisdictional Separations Reform (Item 53, held by staff until 11/9) – This item would direct the Commission staff to provide comments on the current FCC inquiry into jurisdictional separations issues, by which carriers apportion costs between interstate and intrastate jurisdictions.

  • Possible CPUC Comments on ETC “Reverse Auction” Proposal (Item 52, held by staff until 10/19) – This item would direct the Commission staff to provide comments on the Federal-State Joint Board proposal to adopt a system of “reverse auctions” for selecting ETCs.


  • Legislative Wrap-up – Executive Director Larson provided a summary of California legislation of importance to the Commission during the recently concluded legislative session. During his presentation, Mr. Larson utilized the following powerpoint summary: http://www.cpuc.ca.gov/static/aboutcpuc/06+legislative+wrap+up.ppt.

    Mr. Larson began by stating that the CPUC had enjoyed a “very successful” legislative year. Out of 46 bills on which the Commission took a position, 28 made it to the Governor’s desk. Only four of those 28 went against the Commission’s recommendations. Mr. Larson mentioned seven telecommunications bills and one general bill that are of particular significance to the CPUC. These bills are discussed below.

    AB 2390 (Assembly Utilities and Commerce Committee, Signed) – This bill will permit the Commission to deliver final orders by email, and also streamlines other Commission responsibilities. The Commission had supported this legislation.

    SB 440 (Speier, Vetoed) – This bill would have required a lengthy statement on customer bills about customers’ rights, and would have modified various aspects of current law with regard to customer allegations that carrier charges are unauthorized. The Commission had opposed this legislation as inconsistent with the consumer protection initiative, so the Commission was “grateful for the veto.”

    SB 909 (Bowen, Signed) – This bill will streamline the CTF program to allow more eligible entities to qualify for funding. The legislation will provide 100% discounts on upgraded and additional high speed broadband services. The Commission had supported this legislation, as part of its ongoing responsibilities for addressing the “digital divide.”

    SB 1627 (Kehoe, Signed) – This bill will streamline the process by which local governments can grant permits for the construction of wireless telecommunications facilities. The CPUC supported this bill, since it will remove barriers further improvements to the wireless carriers’ networks.

    AB 326 (Blakeslee, Signed) – This bill makes certain findings regarding the importance of the California High Cost Fund A, which will help ensure that the CHCF-A remains viable. The CPUC supported this legislation, since it wants to preserve ongoing funding for this Commission public policy program.

    AB 1388 (Ridley-Thomas, Vetoed) – This bill would have expanded the CTF program in various respects. The Commission had supported this bill with certain amendments, but it was vetoed by the Governor amidst uncertainty about the future of the CTF program.

    AB 2393 (Levine, Signed) – This requires the Commission to prepare three reports regarding how California’s telecommunications network will function during disasters. The Commission had supported this legislation with amendments.

    AB 2987 (Nunez, Signed) – This bill creates a Commission-administered mechanism for issuing statewide video franchises. The Commission has now opened a rulemaking to implement this legislation.

  • Upcoming Commission Events in Fresno – Commissioner Peevey highlighted a series of events that will be taking place in Fresno in the upcoming weeks. First, the Commission’s next agenda meeting will take place in Fresno, at the Fresno City Council Chambers, on October 19, 2006, at 11 a.m. Second, on October 18, 2006, the Commission is sponsoring a “bill clinic” in coordination with various consumer groups. This clinic will provide a forum through which consumers can discuss questions and issues that they have had with their bills with carrier representatives, and with representatives of the Commission’s Consumer Affairs Branch. The clinic will be held at the Fresno Center for New Americans. Third, on October 19, 2006, from 8:15 a.m. to 10:30 a.m., the Great Valley Center will hold a panel discussion about issues of particular significance to utility customers in the central valley. This discussion will be held at the Fresno Convention and Entertainment Center. Further information about these events to be held in Fresno is provided at the following link: http://www.cpuc.ca.gov/PUBLISHED/NEWS_RELEASE/60446.htm.

  • Bohn Praises Successful Diversity Hearings – Earlier in the week, the Commission held another of its panel discussions to address diversity issues. Executives from the major utilities were in attendance, as well as various other interested parties. Commissioner Bohn described the event as a great success, and praised Commissioner Peevey for his leadership on this issue. He also complemented the utilities for their extraordinary improvements in promoting diversity.

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