I. BACKGROUND

On October 12, 1989, the Commission issued Decision 89-10-031, establishing a new regulatory framework for Pacific Bell Telephone Company ("Pacific") and GTE California, Inc. ("GTE"). By this decision, their services were divided into three categories:

· Category I consists of monopolistic services whose rates may be changed only with the Commission's approval.

· Category II consists of partially competitive services whose rates are subject to downward adjustment.

· Category III consists of fully competitive services whose rates are flexible to the maximum extent permitted by law.

33 CPUC 2d 43, 125-127. On April 11, 1990, the Commission issued Decision 90-04-031, adding Ordering Paragraph 30 to Decision 89-10-031, to require that Pacific and GTE, whenever they request that a new or existing service be classified as Category III, address various, specified criteria regarding competitive control over the affected market. Mimeo at 25 to 26. On March 13, 1996, the Commission issued Decision 96-03-020, classifying the various services offered by Pacific and GTE as either Category I or Category II. Included within Category II are "directory listing services." 65 CPUC2d 156, 190.

On August 21, 1996, Pacific filed Advice Letter 18443 with the Commission, seeking authorization to provide Directory Assistance Listing Information Service "for the sale of customer records contained in Pacific's directory assistance database to third parties for their provisioning of directory assistance service." In addition, Pacific requested that this "be treated as an above-the-line, Category III Service." Along with the advice letter, Pacific briefly addressed the criteria set forth in Decision 90-04-031 concerning competitive power. On September 11, 1996, AT&T Communications of California, Inc., MCI Telecommunications Corp., California Cable Television Association, and Time Warner AxS of California collectively filed a protest to Advice Letter 18443 and Metrocall Corporation individually filed comments. On June 24, 1997, the Director of the Telecommunications Division sent a letter to the protestants of Advice Letter 19443 stating that it had been gone into effect on December 1, 1996.

On January 23, 1997, the Commission issued Decision 97-01-043, ordering that Pacific and GTE supply independent publishers and providers with nondiscriminatory access to listings for Directory Assistance. As noted in Conclusion of Law II,

Consistent with the provisions of federal regulations, [Pacific and GTE] should provide competing service providers with nondiscriminatory access to their directory-listing databases, both those used for DA as well as for publishing of directories.

70 CPUC 2d 661, 678. At the same time, the Commission ordered that the price of such access be made subject to further review:

The Administrative Law Judge is directed to issue a procedural ruling calling for comments on whether to make existing directory access rates provisional and to establish a memorandum account to keep track of billings for access to directory databases for the purpose of truing up the changes once final rates are determined in the OANAD proceeding.

Id. at 679.

On January 7, 1998, the Commission issued Decision 98-01-022, determining that those rates should be provisionally based, subject to refund, on Pacific's existing tariffs and ordering Pacific and GTE each to establish a memorandum account to track retroactively revenues received for that service since the date of its inception. In this way, as explained in Conclusion of Law 2, the concern could be addressed that "third party competitors might be subject to unfair discrimination or anticompetitive treatment with respect to directory assistance." 78 CPUC2d 266, 271. On June 4, 1998, the Commission issued Decision 98-06-027, modifying Decision 98-01-022 on rehearing to require that the memorandum accounts track those revenues since the date the Telecommunications Act of 1996 became effective and that the price of access be based on the costs incurred in its provision. As the Commission explained, "We find that Sections 153(29), 222(e), and 252(d)(l)(i) of the [Telecommunication Act of 1996] require that the rates for network elements, including directory publishing information, must be based on cost." 80 CPUC 2d 487, 488. No application was filed for rehearing of this decision.

On February 15, 2001, Metro One Telecommunications, Inc. ("Metro One") and InfoNXX, Inc. ("InfoNXX") - - collectively, "Petitioners" - - jointly filed a petition for modification of Decision 98-01-022. They seek an order requiring Pacific and Verizon California, Inc. ("Verizon"), GTE's successor, to recompute the rates they charged for access to listings for Directory Assistance based on lowest rate in effect each time such access was provided and to refund the difference between the rate actually charged and the recomputed rate. In support of this request, they assert that the long passage of time since issuance of Decision 98-01-022 has caused them undue economic hardship and unfair disadvantage in the market place. Pacific and Verizon each filed a response to this petition, recommending its denial.

On February 7, 2002, the Commission issued Decision 02-02-025, denying in part and granting in part the relief requested by Petitioners. First, the Commission declined to set immediately the rate to be charged for access to listings for Directory Assistance, but reiterated that it should be based on the cost of providing such access. Next, the Commission ordered that Pacific and Verizon no longer be authorized to charge independent providers of Directory Assistance each time they provide a listing to the public. Relatedly, it determined that, once their costs of providing access to listings for Directory Assistance are computed, Pacific and Verizon will be required to refund to independent providers the difference between the rates they were charged since the effective date of the Telecommunication Act of 1996 and the new rates. In addition, the Commission clarified that access supplied independent providers to listings for Directory Assistance should be classified as Category II.

On March 11, 2002, Pacific filed an application for rehearing of Decision 02-02-025. In its view, Decision 02-02-025 "violates the well-established law against retroactive ratemaking; any true-up of DA Listing charged must . . . be limited to January 7, 1998, the date of the decision making those charges subject to refund." Application at 13. Also, according to Pacific, Decision 02-02-025 "recategorizes DA Listings in Category II without notice, evidence, or factual support." Id. at 13-14. By relief, Pacific "requests that the Commission modify Decision 02-02-025 to limit any true-up of DA Listing charges to January 7, 1998, and to delete the recategorization of the DA Listings service." Id. at 14. Metro One, InfoNXX, and LSSi Corp. each filed a response to Pacific's application for rehearing, recommending its denial.