5. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and A. Kirk McKenzie is the assigned Administrative Law Judge in this proceeding.

1. The OIR in this proceeding was issued in May 2009.

2. Pursuant to the schedule set forth in the OIR (as modified by joint rulings issued by the assigned Commissioner and the assigned ALJ on May 22, 2009 and August 6, 2009), the parties submitted initial comments and proposals on June 26, 2009, and reply comments on September 4, 2009.

3. A Scoping Memo for Phase I of this proceeding was issued by the assigned Commissioner on November 9, 2009.

4. In the aforesaid Scoping Memo, the assigned Commissioner accepted (with certain modifications) Verizon's proposal to divide this proceeding into two phases, with the first phase devoted to whether an exemption from the requirements of § 851 should be granted to URF carriers in connection with sales or other dispositions of assets likely to be non-controversial, and the second phase devoted to whether (and to what extent) an exemption from the requirements of § 851 should be granted to URF carriers in connection with sales or other dispositions of assets likely to be controversial, such as assets used to provide collocation, UNEs, and other wholesale services.

5. Consistently with the approach described in the previous Finding of Fact (FOF), the Scoping Memo stated the assigned Commissioner's intent to propose to the Commission that in Phase I of this proceeding, URF carriers (except ILECs still filing GRCs) should, with certain exceptions, be granted an exemption from § 851 with respect to sales or other dispositions of assets falling within Account Nos. 2111 (land), 2112 (motor vehicles), 2113 (aircraft), 2114 (tools and other work equipment), 2121 (buildings), 2122 (furniture), 2123 (office equipment), 2124 (general purpose computers), and 2690 (intangibles) of the FCC's Uniform System of Accounts.

6. With respect to Account 2121 (buildings), the Scoping Memo proposed that an exemption from § 851 should not be granted with respect to buildings that are currently being used to provide collocation space, or in which collocation space has been reserved for the future. The Scoping Memo concluded that whether an exemption from § 851 is appropriate for such buildings is an issue that should be considered in Phase II of this proceeding.

7. The Scoping Memo concluded that it was not appropriate to include Account Nos. 2681 (capital leases) and 2682 (leasehold improvements) within the scope of Phase I, because URF carriers might well be parties to leases covering assets used to provide UNEs, collocation, or other wholesale services, and the issues surrounding such leases were more appropriate for consideration in Phase II.

8. In the Scoping Memo, the assigned Commissioner concluded that notwithstanding the exemption from § 851 he proposed to recommend in connection with the assets to be included in Phase I, URF ILECs relying on this exemption should be required to file an annual report, in the form of a Tier 1 advice letter, that would summarize information about the asset dispositions as to which the ILEC had invoked the § 851 exemption in the preceding year. As a Tier 1 advice letter, the proposed annual report would be subject to protest.

9. The Scoping Memo concluded that this proceeding should be categorized as quasi-legislative, and that hearings would not be necessary in Phase I.

10. The Scoping Memo stated that a separate scoping memo would be issued in connection with Phase II, and that it was not possible at this time to determine whether hearings might be necessary in Phase II, or what the schedule for that phase should be.

11. The Scoping Memo invited all parties to file supplementary comments concerning any remaining issues the parties might have in connection with the types of assets to be included in Phase I.

12. On December 18, 2009, all parties filed supplementary comments concerning various Phase I issues.

13. It its supplemental comments, DRA urged that instead of relying upon FCC accounts to define the assets subject to Phase I, the Commission should consider as controversial, and thus include in Phase II, any asset disposition involving any one or more of the following five factors: (a) competitor access to the telephone network, (b) service quality, (c) services to seniors and low income customers, (d) jobs in California, or (e) safety, privacy, or security.

14. The approach for phasing this proceeding suggested in DRA's supplemental comments would be less workable than the approach taken in the Scoping Memo, because the use of DRA's five factors would make it more difficult to determine which assets the Commission considers within the scope of Phase I, and could thrust the Commission into areas where its jurisdiction is uncertain, among other reasons.

15. As DRA argues, payment centers should not be included within the scope of Phase I, because payment centers remain important resources for many customers seeking to pay or inquire about their bills, including the poor, the elderly, and those with limited or no access to the Internet or traditional banking services.

16. Instead of using a Tier 1 advice letter, URF carriers invoking the § 851 exemption granted in this decision should be required to file an annual report with the Director of the Communications Division, which the Director should post on the Commission's website. This report should not be subject to protest.

17. The Scoping Memo's decision to exclude assets included within Uniform System of Account Nos. 2681 (capital leases) and 2682 (leasehold improvements) should be reconsidered with respect to AT&T and Verizon, because both of these carriers submitted sworn declarations on April 8, 2010 demonstrating that the records they maintain are sufficient to determine whether assets they lease are non-controversial ones of the type being considered in Phase I of this proceeding, or concern UNEs, collocation, or other wholesale services that the Scoping Memo ruled would be considered in Phase II of this proceeding.

18. The Scoping Memo's decision to exclude assets in Uniform System of Account Nos. 2681 and 2682 should not be reconsidered with respect to SureWest, unless and until SureWest files a Tier 3 advice letter demonstrating that the records it keeps concerning leased assets are sufficient to determine whether a particular asset is a non-controversial one of the type being considered in Phase I of this proceeding, or concerns UNEs, collocation, or other wholesale services that the Scoping Memo reserved for consideration in Phase II. Upon approval of such advice letter by Commission resolution, SureWest will be allowed to include Accounts 2681 and 2682 in its list of accounts eligible for the § 851 exemption granted by this decision.

19. The exemption from § 851 granted in this Phase I decision will not raise any issues under CEQA.

20. Phase II of this proceeding is likely to create better policy and to be less contentious if the Commission and the parties have in hand the data concerning use of the § 851 exemption described in FOF 16 before beginning Phase II.

21. Any issues pertaining to CEQA that are not addressed in R.06-10-006 and that relate to any exemption from § 851 that may be granted in the second phase of this proceeding will be addressed in the second phase of this proceeding.

1. Subject to certain conditions, an exemption from the requirements of Pub. Util. Code § 851 should be granted with respect to sales or other dispositions of assets by URF carriers (except ILECs still filing GRCs) that fall within the following account numbers of the FCC's Uniform System of Accounts: 2111 (land), 2112 (motor vehicles), 2113 (aircraft), 2114 (tools and other work equipment), 2121 (buildings), 2122 (furniture), 2123 (office equipment), 2124 (general purpose computers), and 2690 (intangibles).

2. An exemption from the requirements of Pub. Util. Code § 851 should not be granted to URF carriers concerning sales or other dispositions of assets that fall within Account No. 2121 (buildings) of the FCC's Uniform System of Accounts with respect to portions of such buildings that are currently being used to provide collocation services, or that have space reserved in them to provide collocation services in the future.

3. An exemption from the requirements of Pub. Util. Code § 851 should be granted to AT&T and Verizon with respect to sales or other dispositions of assets that fall within Account Nos. 2681 (capital leases) and 2682 (leasehold improvements) of the FCC's Uniform System of Accounts, to the extent such assets are not used to provide UNEs, collocation, or other wholesale services that may be considered in a second phase of this proceeding.

4. An exemption from the requirements of Pub. Util. Code § 851 should not be granted to SureWest or any other URF carrier with respect to assets coming within Account Nos. 2681 and 2682 of the FCC's Uniform System of Accounts unless and until such carrier files a Tier 3 advice letter demonstrating that the records it keeps concerning leased assets are sufficient to determine whether a particular asset is a non-controversial one of the type being considered in Phase I of this proceeding, or an asset used to provide UNEs, collocation, or other wholesale services that may be considered in a second phase of this proceeding. Upon approval of such advice letter by Commission resolution, the URF carrier filing the advice letter should be allowed to include assets coming within Accounts 2681 and 2682 in the list of assets as to which it may invoke the § 851 exemption granted by this decision.

5. Each URF carrier granted an exemption from Pub. Util. Code § 851 by this decision should be required to file an annual report setting forth the transactions for the preceding calendar year as to which the carrier is relying on the § 851 exemption granted herein as a justification for not filing a § 851 application. With respect to each such transaction, the report should state separately the type of asset sold or disposed of, the price, and the nature of the purchaser or transferee. This annual report should not be subject to protest.

6. In the event the purchaser or transferee of an asset is an independent third party, no name need be given in the annual report referred to in the preceding Conclusion of Law (COL). In the event such purchaser or transferee is an affiliate of the utility, the name of the affiliate shall be included in the report of the transaction.

7. The annual report referred to in COL 5 should be filed by March 31 of each year for transactions taking place in the preceding calendar year. The first such report should be due no later than March 31, 2011. Such annual reports should also be due in 2012, 2013 and 2014, and possibly longer.

8. On or after June 1, 2014, any party to this proceeding (or a successor to such a party) should be permitted to file a petition for modification seeking termination of the exemption from § 851 granted in this decision on the ground that such exemption has not effectively served the purposes set out for the exemption in the OIR and in subsequent rulings and decisions in this proceeding.

9. The exemption from § 851 granted in this decision should continue in effect unless and until the Commission acts on any petition for modification filed pursuant to the preceding COL.

10. The second phase of this proceeding described in the Scoping Memo issued on November 9, 2009 should not be held until after the data described in COLs 5, 6, and 7 has been received and evaluated.

11. On or after June 1, 2014, any party to this proceeding (or a successor to such a party) should be permitted to file a petition for modification requesting that this proceeding should be reopened, and that a second phase of this proceeding should be held to consider whether an exemption from the requirements of § 851 should be granted with respect to assets used to provide UNEs, collocation, or other wholesale services.

ORDER

IT IS ORDERED that:

1. Pursuant to the powers set forth in subsection 853(b) of the Public Utilities Code, and subject to the conditions set forth in this Order, an exemption from the requirements of Pub. Util. Code § 851 is hereby granted to all carriers subject to the Uniform Regulatory Framework adopted in Decision 06-08-030 (except for incumbent local exchange carriers still required to file general rate cases) with respect to the sale or other disposition of assets that fall within the following account numbers of the Uniform System of Accounts promulgated by the Federal Communications Commission: 2111 (land), 2112 (motor vehicles), 2113 (aircraft), 2114 (tools and other work equipment), 2121 (buildings), 2122 (furniture), 2123 (office equipment), 2124 (general purpose computers), and 2690 (intangibles).

2. The exemption from Pub. Util. Code § 851 granted by this order shall not apply to sales or other dispositions of assets included within Account No. 2121 (buildings) of the Uniform System of Accounts promulgated by the Federal Communications Commission with respect to portions of such buildings that are currently being used to provide collocation services, or that have space reserved in them to provide such collocation services in the future.

3. Subject to the conditions set forth in this Order, including the conditions regarding the scope of the issues that may be considered in a second phase of this proceeding, Pacific Bell Telephone Company d/b/a AT&T California and Verizon California Inc. and its certificated California affiliates (viz., MCI Communications Services Inc., d/b/a Verizon Business Services, MCImetro Access Transmission Services, d/b/a Verizon Access Transmission Services, TTI National, Inc., d/b/a Verizon Business Services, Teleconnect Long Distance Services & Systems Company, d/b/a Telecom*USA, Verizon Enterprise Solutions LLC, Verizon Long Distance LLC, and Verizon Select Services Inc.) are hereby granted an exemption from the requirements of Pub. Util. Code § 851 with respect to the sale or other disposition of assets that fall within Account Nos. 2681 (capital leases) and 2682 (leasehold improvements) of the Uniform System of Accounts promulgated by the Federal Communications Commission.

4. Any other carrier subject to the Uniform Regulatory Framework adopted in Decision 06-08-030 (except for incumbent local exchange carriers still required to file general rate cases) that wishes to invoke the exemption from the requirements of Pub. Util. Code § 851 granted in this order with respect to the sale or other disposition of assets that fall within Account Nos. 2681 and 2682 of the Uniform System of Accounts promulgated by the Federal Communications Commission shall file a Tier 3 advice letter pursuant to General Order 96-B demonstrating that the records such carrier keeps concerning assets it leases are sufficient to determine whether a particular leased asset is of the type being considered in Phase I of this proceeding, or is used to provide unbundled network elements, collocation, or other wholesale services that may be considered in a second phase of this proceeding. Upon approval of such advice letter by Commission resolution, the carrier filing such advice letter shall be allowed to invoke the § 851 exemption granted by this order with respect to leased assets coming within the aforesaid Account Nos. 2681 and 2682.

5. Each carrier granted an exemption by this order shall file an annual report with the Director of the Communications Division setting forth each transaction for the preceding calendar year as to which such carrier is relying on the exemption from Pub. Util. Code § 851 granted by this order as a justification for not filing an application under Pub. Util. Code § 851 concerning such transaction. With respect to each such transaction, the report shall state separately the type of asset sold or disposed of, the price, and the nature of the purchaser or transferee. This annual report shall not be subject to protest.

6. In the event the purchaser or transferee of an asset covered by the annual report required by the previous ordering paragraph is an independent third party, no name for the purchaser or transferee need be given in the annual report. In the event the purchaser or transferee of an asset covered by the annual report required by the previous ordering paragraph is an affiliate of the utility filing the report, the name of the affiliate shall be included in the report of the transaction.

7. The annual report required by Ordering Paragraphs 5 and 6 herein shall be filed by March 31 of each year for transactions taking place in the preceding calendar year. The first such annual report shall be filed no later than March 31, 2011. Annual reports as required by Ordering Paragraphs 5 and 6 herein shall also be filed in 2012, 2013 and 2014.

8. Nothing in this order relieves any carrier granted an exemption from Pub. Util. Code § 851 herein from having to file reports concerning service quality, safety, or other issues that are required by other Commission decisions.

9. Rulemaking 09-05-006 is closed.

This order is effective today.

Dated May 6, 2010, at San Francisco, California.

I will file a concurrence.

/s/ TIMOTHY ALAN SIMON

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