4. Other issues raised in ACR

The ACR raised several issues, in addition to requesting comment on FONES4ALL's Petition to Modify. Each of those issues are addressed in the following sections.

4.1 "Finder's Fee" Proposal

The ACR proposed a system whereby carriers would be compensated on a one-time basis for getting new customers on the ULTS program, by what was termed a "Finder's Fee." This would supplement the activities of the Commission's marketing activities, in an attempt to see if the "hands-on" direct-contact approach that FONES4ALL describes would be an effective way to reach Californians.

The responding parties were unanimous in their agreement that the Commission should not adopt the Finder's Fee program. The ULTS-AC expresses concern that it is unlikely that a Finder's Fee process administered by carriers would reach unserved population groups, particularly those speaking languages other than English, as effectively and thoroughly as the Commission's already-planned and-approved education and marketing program is able to do.

The ULTS-AC also sees the likelihood of dissipation of the ULTS funds through abuse.

ORA opposes any program that would pay the utilities a Finder's Fee for obtaining new ULTS subscribers, given the administrative complexity of applying this to the telecommunications area. It would be difficult to ensure that telecommunications carriers would get paid only for enrolling new people in the program, rather than being compensated for churn. Any Finder's Fee program that pays carriers to obtain new ULTS customers will require the Commission to develop a system to track and verify who the carriers are claiming to have enrolled, both to be sure the carriers do not have an incentive to enroll ineligible people and to ensure that they do not get paid for enrolling the same people over and over.

FONES4ALL acknowledges that the Commission's Finder's Fee proposal presents a number of difficult implementation issues. While a Finder's Fee may provide carriers with incentives to get ULTS customers connected, it will not begin to compensate carriers for their ongoing costs in providing high quality service to this difficult-to-serve customer segment. In addition, the Commission would need to implement safeguards against precisely the type of duplicitous behavior of marketers and others that was identified in the ACR. FONES4ALL proposes that the Finder's Fee program should be limited to carriers with more than 20,000 customers, based on the fact that small carriers with fewer than 20,000 subscribers who meet the other eligibility criteria of FONES4ALL's proposed pilot project, will be eligible for one ULTS incentive, and accordingly, such carriers should not be able to receive more than one Commission incentive to serve ULTS customers.

The Coalition refers to the ACR's statement that the Commission established a "capitation" fee of $12 to reimburse CBOs for expense incurred to help enroll low-income clients in the CARE program. The Coalition points out that in the telecommunications markets where competitive alternatives exist, a customer could have various options for telephone service. The CARE program, on the other hand, is administered by the monopoly utility. The administrative task of ensuring that telecom carriers are not attempting to improperly generate revenue by gaming the system would be more difficult, time consuming and expensive than it is with respect to the CARE program.

Also, the Coalition asserts that a Finder's Fee creates a powerful and perverse incentive for carriers to enroll ineligible customers. For those reasons, the Coalition cautions against adoption of a Finder's Fee for carriers. The Coalition concludes that given the absolute absence of any strong support for the Finder's Fee proposal, and the presence of strong opposition from a number of parties, the Commission would be ill-advised to implement such a proposal, even on a pilot basis, at this time.

Verizon concurs that the Finder's Fee would prove to be administratively burdensome, and is not convinced that it would improve ULTS subscription. Verizon concludes that it would be difficult to evaluate the success of the pilot Finder's Fee project because it would be hard to determine whether changes in subscribership rates were due to the Finder's Fee or other influences, such as the marketing efforts of the ULTS-MB.

Roseville and the Small LECs believe that the Finder's Fee program would cause fraudulent enrollment to increase dramatically. Such a system would also generate incentives to "churn" subscribers. To avoid this problem, a long period of non-service would have to be established; Roseville and the Small LECs believe that a six-month minimum period without basic service should be required for a carrier to receive a Finder's Fee. Roseville and the Small LECs assert that the only way to prevent abuses of a Finder's Fee program would be an aggressive enforcement effort, which would cost more than its likely worth. The administrator of the program would often be faced with having to prove whether the carrier knew that a particular customer did not meet ULTS criteria. Further, verifying the fraud itself would require the Commission to intrude into the privacy of ULTS subscribers.

LIF/Greenlining concurs with Verizon that any kind of project for signing up new ULTS customers should be competitively neutral and perhaps designed by the ULTS-MB. LIF/Greenlining also express concerns that the Commission would have to create a complex tracking/monitoring system that could be costly.

LIF/Greenlining and other parties pointed out that the ULTS-MB is poised to begin work with CBOs on outreach and marketing.

After reviewing parties' comments, we will not adopt the Finder's Fee proposal at this time. Parties point to the potential for abuse if we provide incentives for unscrupulous carriers or their agents to sign up ineligible consumers for ULTS service. Parties also assert that the Finder's Fee proposal would promote churn. While requiring that a consumer be without service for an extended period (such as the 6 months proposed by Roseville/Small LECs) could prevent churn, we do not want to embark on a program that encourages consumers to be without telephone service for an extended period. The magnitude of any monitoring/enforcement program we instituted to minimize fraud and abuse would be an enormous strain on Commission resources, and probably not worth the effort. We find that the Finder's Fee proposal shares some of the same problems with a lack of proper safeguards as FONES4ALL's pilot project.

We cannot use the "California Alternative Rates for Energy" (CARE) program as our model, since the underlying market for energy is regulated rather than competitive.

4.2 Auto Enrollment Proposal

The ACR made a third proposal to assist in getting more low-income customers signed up for the ULTS program: namely automatic enrollment of customers who are eligible for the low-income program for electric and gas customers, which is referred to as the CARE program. Senate Bill 2, Chapter 11 in 2001, orders the Commission to examine methods to improve CARE enrollment and participation. The bill proposes that the Commission examine whether any customer who has signed up for the ULTS program should be automatically signed up for the CARE program. The ACR proposed to adopt the reverse, namely, any energy customer enrolled in the CARE program would be automatically enrolled in the ULTS program.

ORA listed some of the advantages of automatic enrollment:

ORA also raised some concerns relating to automatic enrollment:

ORA recommends that the issue of auto-enrollment be addressed in the context of the Commission's CARE and ULTS proceeding, R.01-08-027. LIF/Greenlining recognizes that automatic enrollment clearly raises certain privacy, data and cost issues, but believes it is worth pursuing, and suggests using R.01-08-027 as the proper vehicle. LIF/Greenlining concurs with ORA that auto enrollment provides the potential for expanding ULTS enrollment particularly among the elderly and underserved. Roseville and the Small LECs do not take a position on automatic enrollment at this time, but also support further exploration of the proposal. Roseville and the Small LECs also encourage the Commission to identify the possible impact on the ULTS fund that may occur through changing eligibility standards.

We appreciate all the comments and concerns raised by parties. We agree that this idea is still in its infancy, but it needs further examination. Indeed, in D.02-07-033, we concluded that we would not include ULTS in the automatic enrollment program for CARE at the present enrollment program for CARE at the present time. If we decide to explore the issue of automatic enrollment for ULTS sometime in the future, we will open a separate rulemaking in order to explore the issue fully.

4.3 Rules for disconnection due to non-payment of long distance balances

The ACR indicated that some former telephone customers have had their telephone service disconnected due to nonpayment of long distance balances or are unable to establish service due to a poor credit history. The ACR noted that these former customers may not be aware that since May 2001 carriers may not disconnect basic telephone service for failure to pay non-basic telephone charges. The ACR asked for comment on whether the ULTS-MB is the best vehicle to disseminate that information to customers.

LIF/Greenlining, Verizon and Roseville and the Small LECs all support the proposal that the Commission's marketing contractor include the Commission's disconnect policy in all educational and outreach materials. Additionally, Verizon supports the proposal that all LECs provide the disconnect policy to their customers on an annual basis. Roseville and the Small LECs note that a recent affordability study filed with the Commission by Pacific and Verizon has shown that many of the California households that lack basic service cite their long distance debts as the reason. Educating these individuals about their rights to receive local phone service is a responsibility that falls naturally to the ULTS-MB.

We believe that this is just the type of information that should be included in outreach information supplied by the Commission's marketing contractor. Many former customers with long distance debt may not now have telephone service because they believe that that debt precludes them from basic telephone service. In our effort to ensure that all eligible households are connected to the telephone network, we will order the TD to ensure that the Commission's marketing contractor include information on the Commission's disconnect policy in their written outreach materials. The contractor should also train all the CBOs involved in their outreach effort about the disconnect policy as well. In the event that the disconnection rule changes in our Consumer Protection Rulemaking, R.00-02-004, TD shall inform the contractor of the change in the rule.

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