The proposed decision of Commissioner Chong in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and Rule 14.3 of the Commission's Rules of Practice and Procedure. Comments were filed on September 13, 2007, and reply comments were filed on September 18, 2007.
The parties that filed comments are AT&T California, CCTA, DRA, Joint Consumers, Greenlining, Small LECs, SureWest TeleVideo, TURN, and Verizon California Inc. Except for CCTA, Joint Consumers, and TURN, the same parties filed reply comments. However, Greenlining's reply comments were twice the length authorized by Commission rules.37 Assigned Administrative Law Judge (ALJ) Kotz allowed Greenlining to file revised reply comments no later than September 27, 2007. ALJ Kotz also directed that the revised reply comments may not exceed five pages, and that the Greenlining reply comments filed on September 18 may not be referred to for any purpose in this proceeding.38
Commenters continue the debate over build-out requirements and additional reporting requirements. Other DIVCA issues resolved in today's decision remain uncontested.39
We clarify our build-out requirements in response to comments, but we make no substantive modifications to our original proposals. We retain the requirement that all franchise holders report the number of their video customers, but upon consideration of the comments, we will not require reports regarding the means by which wireless broadband data customers are gaining access to the broadband network.
In Section 8.1 below, we discuss and respond to comments relating to build-out requirements; in Section 8.2 below, we discuss and respond to comments relating to additional reporting requirements.
8.1 Response to Comments on Build-Out Requirements
Six parties comment on this issue, which concerns the build-out requirements governing smaller state video franchise holders. CCTA, DRA, Greenlining, and Joint Consumers support the build-out requirements essentially as set forth in the Proposed Decision (PD); Small LECs and SureWest TeleVideo oppose these requirements, although these two commenters substantially modify their own original proposals.
Among the commenters supporting the build-out requirements set forth in the PD, DRA and Joint Consumers offer certain suggestions. DRA (Opening Comments on PD at p. 3) believes the Commission should require "public/community meetings" as part of its review of a request for an extension of time to meet one of the DIVCA milestones (see Pub. Util. Code § 5890(f)) or for an exemption from serving a high-cost area. Joint Consumers argue that the Commission should not allow a state video franchise holder that has applied for and received company-specific build-out requirements, as provided by Section VI.B.1(3) of GO 169, to request an extension of those build-out requirements under Pub. Util. Code § 5890(f). At the least, such a request should be viewed by the Commission with "disfavor," according to Joint Consumers. (See Joint Consumers, Opening Comments on PD at pp. 1-2.)40
We do not adopt either of these suggestions. Regarding community meetings, DRA provides no persuasive argument for requiring them. Franchise holders may consider community meetings useful for various reasons, but we find no basis in this record for us to require such meetings.41 In addition, as we note below, DIVCA provides for a public hearing where a franchiseholder seeks an extension under Pub. Util. Code § 5890(f).
Regarding extensions, we believe that any state video franchise holder may encounter circumstances reasonably causing the franchise holder to miss a build-out milestone, even a milestone proposed by the franchise holder itself. We need not and should not presumptively consider such a request either with favor or disfavor. If the franchise holder is able to show that it has been hindered by factors beyond its control, see Pub. Util. Code § 5890(f)(3), and if it has otherwise made a "substantial and continuous effort" to meet the requirements of its build-out plan, see Pub. Util. Code § 5890(f)(4), we may find that an extension is appropriate and establish a new compliance deadline. Notice of the application is provided to telephone customers of the franchise holder, and public hearings in the telephone service area are required. See Pub. Util. Code § 5890(f)(1), (2). Thus, we expect the Commission will have a full record on which to base its findings on whether to grant an extension.
Joint Consumers also suggest that the Commission allow public participation in any application for company-specific build-out requirements under Section VI.B.1(3) of GO 169. We find merit in this suggestion.
We did not allow public participation (such as protests) in our review of state video franchise applications because, among other things, we concluded that DIVCA afforded us no discretion in performing such review. D.07-03-014, mimeo, text accompanying note 330. In contrast, the review and approval of company-specific build-out requirements is inherently discretionary.
Nevertheless, we believe that consistent with DIVCA policy, company-specific applications should be processed quickly and not turned into utility-type proceedings. We envision that these applications would be subject to protest under our Rules of Practice and Procedure but likely would not go to hearing, i.e., they would be handled under notice-and-comment procedure.42
SureWest TeleVideo and Small LECs oppose the safe harbor and case-by-case compliance mechanisms adopted in the PD for smaller state video franchise holders. They also oppose the PD's extension to these franchise holders of non-discrimination requirements set forth in Pub. Util. Code § 5890(b), which establishes benchmarks for providing video access to low-income households.
The fundamental premise of SureWest TeleVideo and Small LECs has not changed from their earlier comments. The premise is that DIVCA intends smaller state video franchise holders to have greater flexibility than larger holders in demonstrating compliance with build-out requirements. We agree with the premise, but flexibility cannot be so loose as to defer compliance unreasonably.
SureWest TeleVideo and Small LECs recognize that their original safe harbor proposal, which would have doubled the build-out timeframes allowed by DIVCA for larger franchise holders, may have seemed excessive. They now propose for smaller franchise holders that the Commission add "one to two years to the build-out requirements identified in Section 5890(e) and [use] those extended build-out standards as the safe harbors contemplated in Section VI.B.1.(2) of General Order 169." SureWest TeleVideo, Opening Comments on PD at p. 5. SureWest TeleVideo now also recommends that the Commission simply abandon the case-by-case compliance mechanism altogether (deleting Section VI.B.1.(3) of GO 169), and allow any smaller franchise holder that has trouble meeting a safe harbor benchmark to apply for an extension of time under Pub. Util. Code § 5890(f). Id.43
We reject SureWest TeleVideo's "one to two years" proposal, which - like the five extra years that SureWest TeleVideo originally proposed - is vague and unsupported. We are also not inclined to eliminate the company-specific compliance mechanism; that mechanism is clearly contemplated by DIVCA in Pub. Util. Code § 5890(c). We regard the opportunity to develop a company-specific build-out plan as a key part of the flexibility intended by the Legislature for smaller state video franchise holders.44
Regarding non-discrimination requirements, a smaller state video franchise holder implementing an approved, company-specific build-out plan under Pub. Util. Code § 5890(c) will be in compliance with these requirements by "offer[ing] video service to all customers within [its] telephone service area within a reasonable time, as determined by the commission."45 Id., emphasis added. However, when a smaller state video franchise holder is implementing a build-out plan pursuant to one of the safe harbors, the franchise holder cannot claim the presumption of compliance with DIVCA's non-discrimination requirements under Pub. Util. Code § 5890(c) for company-specific build-out plans. Rather, as we concluded in the PD, that franchise holder must be subject to the non-discrimination benchmarks set forth in Pub. Util. Code § 5890(b).
In arguing against these benchmarks, SureWest TeleVideo and Small LECs essentially attempt to rewrite Pub. Util. Code § 5890. The safe harbor they prefer for smaller state video franchise holders would include the extension provisions in Pub. Util. Code §§ 5890(e) and (f) but would omit the non-discrimination benchmarks in Pub. Util. Code § 5890(b). We find that non-discrimination is a pervasive legislative concern in DIVCA, and we see no basis for ignoring that concern in designing a safe harbor for build-out by smaller state video franchise holders.
Small LECs pose a hypothetical that they claim illustrates a problem with our non-discrimination standard (discussed in Section 2.3 above) for any franchise holder whose service area includes a relatively low proportion of low-income households:
Under the Proposed Decision's approach, a Small LEC whose customer base includes only 10% low-income households would have to make a specific showing that its build-out includes at least 10% low-income individuals. With small, sparse, rural populations, implementing such a requirement can lead to perverse results. For example, consider a Small LEC with 1,000 households, 100 of which qualify as "low-income." If this Small LEC builds out to 80% of its households, it must show that its footprint includes at least 80 low-income households. Unlike in an urban area, these 80 low-income households may bear no geographic relation to each other. That is, there may be no particular area where the provider could build to sweep in all of these 80 households. There may be no systematic way for the Small LEC to ensure that it meets the low-income requirement. Companies facing these circumstances may be wary of applying for a state franchise. Alternatively, they may be forced to undertake the significant cost of specifically targeting a very small number of geographically-dispersed low-income households in manner that deviates from a rational build-out.
Small LECs, Opening Comments on PD at p. 6.
We have carefully considered this hypothetical but fail to perceive it as a problem. If the "significant cost" in offering service to areas including 80 low-income households would include areas that are "substantially above the average cost of providing video service in [the smaller franchise holder's] telephone service area," then the franchise holder in the hypothetical is excused from offering video service to those areas under Pub. Util. Code § 5890(c); and if the "significant cost" does not rise to a level substantially above the average, we see no reason in law or logic why the franchise holder should not be required to offer service in those areas.
SureWest TeleVideo asks a series of questions regarding the procedure for applying for company-specific build-out plans under GO 169. See SureWest TeleVideo, Opening Comments on PD at p. 4. For example, "Is a smaller provider prohibited from serving customers until such application is granted?" Id. The answer is no; as clearly stated in GO 169, the smaller state video franchise holder need only file its company-specific build-out plan in the same calendar year in which it applies for its state video franchise. If the applicant prefers, it may obtain its state video franchise before filing its company-specific build-out plan, and having received its franchise from the Commission, may therefore commence any lawful activity under its franchise, including construction and service.46
SureWest TeleVideo objects that a smaller franchise holder must file its company-specific build-out plan application within the same calendar year that it receives its franchise while a larger franchise holder has "two full years to evaluate its build-out progress before returning to the Commission if it needs additional time." SureWest TeleVideo, Opening Comments on PD at p. 4. The objection misleadingly compares two fundamentally different types of proceeding. The franchise holder in the company-specific build-out plan application is creating a build-out plan; the franchise holder seeking an extension already has a build-out plan that is failing to meet the statutory deadlines. Contrary to the impression given by SureWest TeleVideo, the latter franchise holder is under far greater time pressure.47
SureWest TeleVideo and Small LECs assume that the company-specific build-out plan application would be slow and expensive. We question that assumption. At least the Small LECs are still subject to cost-of-service regulation. Many factors relevant to the cost of providing video service to their telephone service area are already a matter of public record.
We do not expect of Small LECs the kind of cost showing that a Verizon or an AT&T would be able to sponsor. A qualitative showing should be adequate to the purpose. Such a showing should address the relevant build-out factors, and should explain how the circumstances in the franchise holder's specific service area affect the timing of the build-out. The showing should indicate both circumstances that might tend to slow the pace of build-out (for example, a widely-dispersed customer base) and circumstances that might accelerate build-out (for example, fiber in place for much of the system).
Small LECs ask that we incorporate into GO 169 the various extension provisions of DIVCA. These provisions are Pub. Util. Code §§ 5890(e)(3), (4), and 5890(f). See Small LECs, Opening Comments on PD at p. 10. In response, we clarify that the build-out compliance mechanisms we approve today for smaller state video franchise holders include these extension provisions. With this clarification, we see no need to repeat or expressly incorporate these provisions in GO 169.
8.2 Response to Comments on Additional Data Reporting
The Commission proposed two additional reporting requirements, one dealing with the number of video subscribers by census tract, and the other dealing with the type of device customers are using to access broadband wireless services.
Seven parties comment on the issue of requiring additional data to be reported. Verizon California Inc., AT&T California, SureWest TeleVideo, Small LECs, and CCTA oppose either or both of these requirements. Greenlining, Joint Consumers, and TURN support these requirements, but argue that additional reporting on speed and technology should be required; DRA supports the additional requirement for reports on video subscribership.
We adopt the requirement for reporting the number of video subscribers by census tract, but do not adopt the proposed requirement for reporting on the type of device used to access broadband wireless services.
Both AT&T California and Verizon California Inc. oppose the requirement for subscribership data, arguing that DIVCA's non-discrimination and build-out requirements are defined solely in terms of "access" to video service, not subscribership. They quote Pub. Util. Code § 5890(a):
A cable operator or video service provider that has been granted a state franchise under this division may not discriminate against or deny access to service to any group of potential residential subscribers because of the income of the residents in the local area in which the group resides.
In arguing that this language deals only with "access" to service, i.e., availability, however, both commenters neglect the prohibition that a holder "may not discriminate against" any group because of the income of the residents in the local area in which the group resides.
The statute clearly prohibits two things: discrimination and denial of access. The rules of statutory construction require that we give meaning to all provisions of a statute, in this case, both discrimination and denial of access. Reporting of subscribership data will help us ensure compliance with the non-discrimination provision of Section 5890(a), to which all state video franchise holders are subject.
AT&T California and Verizon California Inc. argue that compliance with the non-discrimination and build-out requirements of Section 5890 should be measured over of the provider's entire service area. We agree with their interpretation in the case of Section 5890(b)(3), which states:
(3) Holders provide service to community centers in underserved areas, as determined by the holder, without charge, at a ratio of one community center for every 10,000 video customers.
Section 5890(a), by contrast, explicitly refers to discrimination, not in the context of the entire franchise area, but with regard to the "income of the residents in the local area in which the group resides." In short, while subdivision (b)(3) looks at franchise-wide subscription numbers, subdivision (a) looks at discrimination in terms of "local areas."
In arguing generally against additional reporting requirements, AT&T California also points to DIVCA's declaration that "video service providers are not public utilities or common carriers," and may not be regulated as such. (Opening Comments on PD at p. 4.) However, our requirement that holders provide data annually on the number of video subscribers by census tract derives from our enforcement duties under DIVCA; the requirement does not constitute common carrier or utility regulation.
AT&T California48 and Verizon California Inc. both claim that the Commission may not require franchise holders to report the number of their video subscribers because this kind of reporting was considered during DIVCA negotiations in the Legislature but not enacted. While this history may be of some use in determining legislative intent where the language of a statute is unclear, we must first look to the language that is included in the statute itself. As DIVCA prohibits discrimination in addition to denial of access, we find it appropriate to require reports that allow us to determine whether a holder has violated the rule that it "may not discriminate against ... any group of potential residential subscribers because of the income of the residents in the local area in which the group resides."49
Finally, both AT&T California and Verizon California Inc. express concern about reporting competitively sensitive subscribership information. As we had already noted in the PD, upon a proper showing by the franchise holder submitting the information, competitively sensitive data will receive confidential treatment.
We also reject CCTA's suggestion that this additional reporting requirement regarding video subscribership should not apply to franchise holders that are cable companies, which evidence compliance with build-out requirements by submitting an affidavit to the Commission that all of the holder's telephone customers are offered video service. CCTA's suggestion, like the arguments of Verizon California Inc. and AT&T California discussed above, takes into account only the access requirement of Section 5890(a), and not the prohibition on discrimination.
While we decide here to adopt the reporting requirement regarding video subscribers, we will not adopt our proposal to require reporting on the type of device customers are using to access broadband wireless services. While such a requirement was supported by some commenters, we are persuaded by those parties with affiliates who provide wireless service that our broadband proposal should not be adopted. We find that the functionality of handheld devices is rapidly changing, and any distinction with wireless data cards is likely to be meaningless.
Finally, we decline to expand our reporting requirements further at this time, as urged by TURN, Joint Consumers, and Greenlining, to include additional information on pricing, technology, and data speed. We find that unlike subscribership data, information on pricing, technology, and data speed does not appear necessary for our enforcement of specific DIVCA provisions.
37 Rule 14.3(d) of the Commission's Rules of Practice and Procedure provides in relevant part, "Replies shall not exceed five pages in length."
38 Greenlining filed "amended" reply comments on September 24. The amended reply comments also exceeded the five-page limit, using most of a sixth page. ALJ Kotz directed that the additional substantive material on the sixth page not be referred to for any purpose in this proceeding.
39 In Conclusion of Law 10 and Ordering Paragraph 3 of today's decision, where we rely on Ordering Paragraph 25 of D.07-03-014 (the Phase I decision of this rulemaking), we deny TURN's request for intervenor compensation for its participation in Phase I; we also deny two notices of intent filed in Phase I. In its comments, TURN incorporated by reference the legal objections TURN raised in its application for rehearing of D.07-03-014 regarding the Commission's denial of intervenor compensation in DIVCA proceedings. Similarly, AT&T California incorporated by reference in its reply comments its response to TURN's application for rehearing. We note that the application for rehearing is still pending and will be addressed by separate order.
40 Greenlining, in its Amended Reply Comments on PD at p. 3, supports Joint Consumers' suggestion.
41 We note that SureWest Televideo and Small LECs oppose DRA's proposal in their respective Reply Comments on the PD.
42 The applicant for a company-specific build-out plan is likely to be a Small LEC; as discussed later, we think that most or all of the factors relevant to the application may be matters of public record and not reasonably subject to dispute. Furthermore, under GO 169, the company-specific application would be a planning proceeding and thus quasi-legislative in character, which would lend itself to notice-and-comment procedure. In contrast, under the proposal for company-specific build-out plans that SureWest TeleVideo and Small LECs had sponsored, the Commission would only have reviewed the plans in a complaint or investigation. Either of those proceedings would be an adjudication involving evidentiary hearings.
43 Small LECs support these proposals by SureWest TeleVideo. See Small LECs, Opening Comments on PD at pp. 9-10; Reply Comments on PD at p. 1.
44 We are surprised that SureWest TeleVideo and Small LECs seem to consider extension applications in the safe harbor context preferable to company-specific build-out plans. We note that the former applications are subject to stringent statutory requirements, including the requirement to hold a public hearing if requested. See Pub. Util. Code § 5890(f)(1), (2). Moreover, the applicant for an extension would apparently have to make all of the factual showings necessary for a company-specific build-out plan, and in addition would have to demonstrate to our satisfaction that the applicant made "substantial and continuous effort" to meet the relevant build-out requirements. Pub. Util. Code § 5890(f)(4). Notwithstanding these difficulties, if a smaller state video franchise holder wishes to apply for an extension under Pub. Util. Code § 5890(f), we have clarified below that it may do so.
45 However, the smaller state video franchise holder need not offer video service in an area where the cost to provide video service is substantially above the average cost of providing video service in that telephone service area. Pub. Util. Code § 5890(c).
When a franchise holder provides video service outside of its telephone service area, DIVCA authorizes the Commission to review the franchise holder's proposed video service area to ensure that the area is not drawn in a discriminatory manner. See Pub. Util. Code § 5890(d). Taken as a whole, the various subdivisions of Pub. Util. Code § 5890 contain a comprehensive set of non-discrimination requirements under all compliance scenarios.
46 Although the franchise holder would not concurrently have a Commission-approved build-out plan, the same thing would be true under SureWest TeleVideo's proposal for company-specific plans. In fact, SureWest TeleVideo's proposal poses much higher risks for the franchise holder than the company-specific build-out plan procedure we adopt today. Under the SureWest TeleVideo proposal, the franchise holder would be at risk for rejection by the Commission of its build-out plan in a complaint or an investigation that might occur many years after receiving its franchise.
47 In fact, the company-specific build-out plan application could be filed before receipt of the franchise if the applicant prefers.
48 AT&T California also reiterates its argument that we cannot impose additional reporting requirements. That argument, rejected in the Phase I Decision, is discussed and rejected earlier in today's decision as well.
49 See DRA's Reply Comments on PD, discussing the usefulness of such reports for the Commission to determine whether holders are complying with anti-discrimination requirements. See also Greenlining's ReplybComments on PD, discussing the usefulness of subscribership information by census tract as a measure of actual progress in closing the "digital divide."