3. The Commission has Jurisdiction to Act

We find that we have jurisdiction to address the issues raised by the CALTEL petition and to establish the process we adopt here. As an initial matter, we note that in its Triennial Review Order (TRO),¹¹ the FCC declined to adopt any rules to prohibit the ILECs from retiring copper loops or subloops that they have replaced with FTTH loops.¹² The FCC explicitly left open for state commissions "to evaluate whether retirement of copper loops complies with state legal or regulatory requirements":

...[W]e stress that we are not preempting the ability of any state commission to evaluate an incumbent LEC's retirement of its copper loops to ensure such retirement complies with any applicable state legal or regulatory requirements. We also stress that we are not establishing independent authority based on federal law for states to review incumbent LEC copper loop retirement policies. We understand that many states have their own requirements related to discontinuance of service, and our rules do not override these requirements.¹³

We find that in this passage the FCC recognized this Commission's express authority to consider whether state law, rules or procedures exist or should exist to govern ILEC retirement of copper facilities. Even if, as the ILECs contend, the state law had to pre-date the 2003 TRO decision by virtue of the FCC's use of the present tense in stating that "many states have their own requirements,"¹⁴ at least two California statutes qualify.

Pub. Util. Code § 709, effective January 1, 2003, requires the Commission to facilitate the availability of broadband networks in California, as follows:

1) "continue our universal service commitment by assuring the continued affordability and widespread availability of high-quality telecommunications services to all Californians"
(§ 709(a));

2) "encourage the development and deployment of new technologies and the equitable provision of services in a way that efficiently meets consumer need and encourages the ubiquitous availability of a wide choice of state-of-the-art services" (§ 709(c)); and

3) make efforts to "assist in bridging the `digital divide' by encouraging expanded access to state-of-the-art technologies for rural, inner-city, low-income and disabled Californians" (§ 709(d)).

The record of this proceeding demonstrates that the copper network is increasingly useful to facilitate advanced services in this state. As Integra points out in material submitted with its comments,¹⁵ digital subscriber line (DSL) is but one use of copper plant to facilitate broadband. While ADSL started out with up to 1.5 megabits per second (Mbps) of capacity, ADSL2 can provide 25 Mbps/pair. VDSL2 can provide up to 100 Mbps/pair on short loops of less than 1,000 feet, enough bandwidth to support services such as high definition television and video-on-demand. Ethernet over copper is a relatively recent robust application (with speeds up to 20 Mbps) for California business, especially small business. Thus, use of copper wiring for broadband purposes is one way of meeting our obligations to advance broadband deployment under § 709. Thus, § 709 is a statute under which we have authority to act.

Pub. Util. Code § 851, enacted in 1951, requires utilities to apply for Commission approval to sell, lease, assign, mortgage, or otherwise dispose of or encumber facilities that are necessary or useful in the performance of their duties to the public. CALTEL argues that the retirement of copper loops is removal of plant that is necessary or useful and that the ILECs must obtain Commission approval regarding such retirement.¹⁶ AT&T argues on the other hand that Section 851 "by its own terms, does not apply to property that is no longer necessary or useful to the ILEC in the performance of the ILEC's duties to the public."¹⁷

Verizon argues that Pub. Util. Code § 851 does not apply to the "retirement" of copper loops, as it only applies to "transactions" such as the sale, lease, encumbrance or "disposition" of public utility property that is necessary or useful to its public service obligations.¹⁸ We disagree, and find that the term "otherwise dispose of" is broad enough to encompass copper loop retirements, as CALTEL asserts.¹⁹ See Crum v. Mt. Shasta Power Corp., 220 Cal. 295, 308 (1934) (holding that a hydroelectric power company could not release excess water from a river to maintain the level of a pool without the prior approval of the Railroad Commission [this Commission's precursor] because the river water had been dedicated to a public purpose). The common dictionary definition of "dispose" includes "to get rid of, or to deal with conclusively," and therefore includes retirement.²⁰

However, for the following reasons, we believe that we should not require Section 851 approval for the retirement of individual copper loops. The Commission has previously stated that "[o]ne of the fundamental purposes of Section 851 approval of the sale or transfer of utility assets is to permit the Commission to make a determination that the assets transfer will not impair the ability of the utility to provide adequate service to its customers following the transaction."²¹ Section 851 applies to plant that is "necessary or useful in the performance of the utility's duties to the public." Pub. Util. Code § 851. The FCC permitted ILECs to retire copper loops if they are replacing the loop with FTTH or FTTC loops; therefore, the FCC effectively relieved ILECs of the duty to provide the copper loop if the ILEC is actually retiring the copper facility.

We take a similar approach to the FCC's policy of permitting ILECs to retire copper loops under specific circumstances. We note that there is not evidence of actual harm that has occurred in this State with ILEC copper retirement. Further, two statutes establish our policy to encourage the deployment of broadband networks. Our State policy under Section 709 is to promote advanced services networks and to encourage the deployment of new technologies. Moreover the Digital Infrastructure and Video Competition Act (DIVCA), at Pub. Util. Code § 5800 et seq., establishes our State policy to "[p]romote the widespread access to the most technologically advanced cable and video services to all California communities in a nondiscriminatory manner." Pursuant to DIVCA, the ILECs are deploying their fiber-based networks in part to support broadband and video services. We have a legislative mandate to ensure that our policies do not deter network investment, and, instead, promote such investment. The ILECs have asserted that maintaining copper networks along with new fiber networks would prevent them from fully deploying their fiber networks.²² A requirement that the ILECs seek approval for retirement of their individual copper loops may thus deter or prevent the ILECs from proceeding with their network plans. For these reasons, we decline to interfere with the network investment plans of ILECs, by requiring Section 851 approvals for copper retirement.

Therefore, consistent with the FCC's policy in the TRO, and pursuant to our authority under Section 853(b), we find that it is not necessary in the public interest for ILECs to obtain Section 851 approval for the retirement of copper loops. We thus exempt ILECs from seeking Commission approval pursuant to Section 851 of the retirement of copper loops, on the condition that the ILEC complies with obligations under FCC rules and with the notice and good faith negotiation provisions that we establish herein. If there is evidence that the ILECs are engaging in anti-competitive behavior in this regard, we may revisit the issue. As for the impact of the ILEC's retirement of copper loop on its retail customers, when retiring a copper loop, we require the ILEC to offer to its retail end-user customer the comparable service over fiber that the customer was previously receiving.

As discussed above, the Commission has jurisdiction with regard to the issues raised by CALTEL's petition. However, we do not believe that there is adequate evidence in the record that the ILECs are unilaterally disrupting competitors' service over copper lines, or that consumers are being harmed. The Commission has a strong interest in advancing policies that promote the widespread availability of broadband networks (including fiber deployment) to ensure global competitiveness and economic development in our State. Thus, we decline to adopt a policy that is inconsistent with the FCC TRO.

¹¹ Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers; Implementation of the Local Competition Provisions of the Telecommunications Act of 1996; Development of Wireline Services Offering Advanced Telecommunications Capability, 18 FCC Rcd 16978 (2003) (TRO).

¹² Id. at ¶ 281.

¹³ Id. ¶ 284.

¹⁴ We do not necessarily agree with the ILECs' interpretation of the FCC language as applying only to pre-existing state law, but assume that interpretation for purposes of argument.

¹⁵ Comments of Integra Telecom of California, Inc. on Order Instituting Rulemaking, R.08-01-005, dated March 14, 2008, Exhibit 1, at 8-9.

¹⁶ Comments of CALTEL on Order Instituting Rulemaking, R.08-01-005, dated March 14, 2008 (CALTEL Opening Comments), at 14-15. CALTEL's argument is that Section 851 applies to the retirement of copper facilities because the facilities are an integrated part of the network that is used by the ILECs and CLECs. CALTEL also asserts that the ILECs have a duty to serve the CLECs; and that copper facilities are used to provide wholesale services.

¹⁷ Comments of AT&T on Order Granting Petition for Rulemaking, R.08-01-005, filed March 14, 2008 (AT&T Opening Comments) at 8.

¹⁸ Verizon Reply Comments, at 29-30. Verizon further asserts that absent a "transaction," Section 851 does not apply on its face to copper loop retirement.

¹⁹ CALTEL Opening Comments, filed Sept. 2, 2008, at 5.

²⁰ Id. at 3, citing Merriam Webster Online Dictionary, http://www.merriam-webster.com/dictionary/dispose.

²¹ See D.07-03-008; D.05-09-008 (noting that "Our primary objective in reviewing the sale of utility property is to ensure that disposition or encumbrance of public utility property does not impair a utility's public service to customers").

²² See, e.g., AT&T Opening Comments at 25-26, Verizon Opening Comments at 33-34.