VII. Assignment of Proceeding
Geoffrey F. Brown is the Assigned Commissioner and A. Kirk McKenzie is the assigned Administrative Law Judge in this proceeding.
1. The original complaint and motion for a TRO were filed on January 13, 2003.
2. In their January 13 TRO motion, complainants contended that DSL subscribers in California were facing irreparable harm as a result of DIRECTV's decision to shut down its DSL network on January 16, 2003. They also contended that SBC ASI and Verizon were acting unlawfully by either (1) offering DSL subscribers transitioning from DIRECTV less downtime if these subscribers chose the ISP affiliates of SBC and Verizon as their new DSL provider rather than a non-affiliated ISP, or (2) participating in misleading advertising campaigns designed to convince DIRECTV subscribers that the amount of downtime they would experience would be less if they chose one of defendants' ISP affiliates as their new DSL provider rather than a non-affiliated ISP.
3. In their TRO motion, complainants sought an order (1) requiring defendants to maintain DSL Transport connectivity for all DIRECTV subscribers until March 14, 2003, (2) prohibiting defendants from discriminating in favor of their ISP affiliates (SBCIS and Verizon Online) with respect to downtime and other aspects of the transitioning process, or in the alternative, if such discrimination was not occurring, (3) requiring defendants to issue corrected advertisements stating that DIRECTV customers who transitioned to a non-affiliated ISP would not be disadvantaged with respect to downtime.
4. Verizon responded to the TRO motion on January 15, 2003, and SBC ASI and SBC California responded on January 16. In their responses, both Verizon and SBC ASI denied that they had discriminated in favor of their ISP affiliates or had issued misleading advertisements, and emphasized that ordering them to maintain DSL Transport connectivity for all DIRECTV subscribers through March 14 could have the effect of harming these subscribers by leaving them with no DSL service in the event DIRECTV decided to shut down its DSL network prior to March 14, 2003.
5. In a January 17, 2003 conference call, complainants acknowledged that an immediate TRO hearing was no longer necessary because DIRECTV had announced that its network would remain in operation through the end of January. Complainants also acknowledged that the form of TRO they had requested on January 13 could leave some DIRECTV subscribers without any DSL service for an extended period of time.
6. On January 22, 2003, complainants informed the ALJ that they would no longer be seeking a TRO against Verizon and its affiliates.
7. On January 23, complainants submitted a reply pursuant to the ALJ's permission which asserted that SBC California and SBC ASI were engaged in deceptive advertising, and which requested that a revised form of TRO be issued against these two companies. Complainants requested that the revised TRO should (1) enjoin SBC California from engaging in marketing to former DIRECTV subscribers who had chosen one of the complainants as their new ISP provider, (2) enjoin SBC ASI technicians from disparaging complainants' ISP service, and (3) order SBC ASI and/or SBC California to notify all DIRECTV subscribers that SBC ASI would be maintaining DSL Transport connectivity for DIRECTV through February 28, 2003, and that defendants would seek to transition DIRECTV subscribers to a new ISP of their choice with a maximum of five days downtime.
8. On January 27, 2003, both SBC ASI and SBC California submitted briefs in opposition to complainants' request for a revised TRO, as well as extensive written testimony opposing issuance of the TRO.
9. Complainants did not request a postponement of the scheduled January 30, 2003 TRO hearing date in order to seek discovery regarding any of the contentions in defendants' written testimony.
10. At the January 30 TRO hearing, the ALJ ruled that although the clarity of the advertisement attached to complainants' January 23 reply as Exhibit 1 (and to the Amended Complaint as Exhibit 6) might have been improved upon, the advertisement was not misleading with respect to the price being charged for SBC Yahoo DSL service.
11. At the January 30 TRO hearing, the ALJ ruled that an order prohibiting SBC California from marketing to former DIRECTV subscribers who had chosen one of the complainants as their new ISP provider was not justified because, inter alia, such an order would likely run afoul of FCC rules requiring SBC ASI to keep proprietary customer information confidential, and would apparently be inconsistent with SBC ASI's own internal policies protecting the confidentiality of such ISP customer information.
12. At the January 30 TRO hearing, the ALJ ruled that an order prohibiting SBC ASI technicians from disparaging the DSL service offered by complainants was not justified, because complainants had failed to offer any evidence that disparagement of them had occurred, and also because testimony by SBC ASI's witness established that the few documented instances of disparagement of ISPs that had occurred since 2000 had been dealt with promptly.
13. At the January 30 TRO hearing, complainants acknowledged that DIRECTV's recent decision to post on its website a notice informing subscribers that DIRECTV's DSL network would remain in operation through February 28, 2003, had rendered moot the portion of complainants' revised TRO request seeking an order requiring defendants to inform DIRECTV subscribers of the February 28 shutdown date.
14. SBC ASI witness Becky De La Cruz testified that it was not technically feasible as of the date of the January 30 TRO hearing to guarantee to DIRECTV subscribers that they would experience no more than five days of downtime in transitioning to another ISP, because even with a special procedure for stacking DIRECTV disconnect orders with connect orders from new ISPs, downtime was still averaging about seven business days.
15. Sonic president Dane Jasper testified at the TRO hearing that he was not seeking a shorter downtime interval than SBC ASI could currently provide.
16. The ALJ ruled that based on (1) the absence of a direct business relationship between SBC ASI and DIRECTV's customers, (2) the De La Cruz testimony concerning current downtime intervals, and (3) the fact that ISP transitioning downtime on SBC ASI's system was likely to be significantly reduced in the near future owing to system improvements resulting from field trials in the CISPA case, there was no justification for requiring SBC ASI to inform DIRECTV customers that SBC ASI would endeavor to transition them to a new ISP with no more than five days of downtime.
17. Owing to the conclusions set forth in Finding of Fact (FOF) Nos. 10-16, the ALJ denied complainants' revised request for a TRO.
18. At the conclusion of the January 30 hearing, the ALJ ruled that complainants would be permitted to file an Amended Complaint no later than February 18, 2003, and that defendants should advise him whether they would answer the Amended Complaint or move to dismiss it.
19. SBC ASI, SBC California and VADI all informed the ALJ on March 7, 2003 that they would move to dismiss the Amended Complaint. Pursuant to the ALJ's ruling, the dismissal motions were filed on March 25, 2003, and complainants submitted a response in opposition on April 18, 2003. With the permission of the ALJ, VADI submitted a short reply on April 25, 2003.
20. The Amended Complaint alleges that Exhibit 2 thereto (the joint press release issued by SBCIS and DIRECTV on December 27, 2002), as well as Exhibit 6 thereto (an undated mailer concerning SBC Yahoo service), were part of a misleading advertising campaign which sought to suggest, falsely, that if DIRECTV subscribers wanted to minimize their downtime when transitioning to a new ISP, they should choose SBC Yahoo service rather than another ISP's service.
21. In fact, the Amended Complaint alleges, there was no difference in the downtime that a DIRECTV subscriber would experience when transitioning to SBC Yahoo versus an independent ISP.
22. The Amended Complaint alleges that because SBC ASI did not inform non-affiliated ISP customers like complainants that DIRECTV planned to keep its network in operation through February 28, 2003, even though this information was known independently by SBCIS, SBC ASI has unlawfully discriminated against its unaffiliated ISP customers.
23. The Amended Complaint alleges that, between December 13 and December 30, 2002, SBC ASI unlawfully discriminated against unaffiliated ISPs by failing to post information on its CPSOS system about what the disconnection dates for individual DIRECTV customers would be, even though this information was ordinarily available on the CPSOS system.
24. The Amended Complaint alleges that because VADI did not inform non-affiliated ISP customers like complainants that DIRECTV planned to keep its network in operation through February 28, 2003, even though this information was known independently by Verizon Online, VADI has unlawfully discriminated against unaffiliated ISP customers.
25. The Amended Complaint alleges that VADI unlawfully discriminated against its unaffiliated ISP customers by failing to inform them until January 8, 2003 that VADI had developed a hot swap procedure for minimizing downtime for customers seeking dynamic IP addresses, even though this procedure was disclosed earlier to VADI's affiliate, Verizon Online.
26. The Amended Complaint alleges that VADI unlawfully discriminated against its unaffiliated ISP customers by failing to inform them until January 14, 2003 that the hot swap procedure could also be used for DSL subscribers seeking static IP addresses, even though this information was known to Verizon Online.
27. In her testimony at the January 30 TRO hearing, Becky De La Cruz stated that the CPSOS system is partitioned so that as a normal matter, only the ISP with a particular subscriber can send in a disconnect order for that subscriber, and that other ISPs would not be able to view such disconnection information on the CPSOS system.
28. Becky De La Cruz testified at the January 30 TRO hearing that it was only because DIRECTV had given SBC ASI a special authorization to make information concerning its subscribers generally available to all ISPs that users of the CPSOS system (such as complainants) became able to access information regarding the disconnect dates for particular DIRECTV customers. Ms. De La Cruz also testified that it took until December 30, 2002 for SBC ASI technicians to modify the normal information partitioning systems on CPSOS so that such customer information could be viewed by all ISPs.
29. At the January 30 hearing, complainants did not undermine the testimony described in FOF Nos. 27 and 28.
30. In their April 18, 2003 response, complainants have not disputed SBC ASI's assertion that SBCIS became aware of the February 28, 2003 shutdown date for DIRECTV's DSL network through communication with DIRECTV rather than as a result of preferential treatment by SBC ASI.
31. In his March 27, 2003 declaration, Thomas Wolthoff states that Verizon Online became aware of the February 28, 2003 shutdown date for DIRECTV's DSL network by virtue of being a party to the Transition Agreement with VADI and DIRECTV, rather than as the result of preferential treatment by VADI.
32. The March 27 Wolthoff declaration also states that VADI sent its wholesale customers an e-mail message on January 3, 2003 informing them that DIRECTV's DSL system would remain in operation through February 28, but that DSLExtreme, the only complainant served by VADI, failed to receive this message because DSLExtreme had not kept the e-mail addresses in its VADI customer profile up-to-date.
33. Complainants' papers do not dispute the factual assertions summarized in FOF Nos. 31 and 32.
34. According to the March 27 Wolthoff declaration, on December 17, 2002, VADI advised Verizon Online that while VADI was working on a more efficient transition procedure, Verizon Online could advise prospective customers either to proceed with the standard disconnect/install procedure, or to not disconnect from DIRECTV and hold their orders while the more efficient process was being worked on.
35. According to the March 27 Wolthoff declaration, VADI sent an e-mail message to all of its ISP customers on December 20, 2002 stating that it was working on a more efficient transition procedure. On December 24 and on January 3, 2003, VADI sent all of its ISP customers e-mail messages with the same advice it had given to Verizon Online, as set forth in FOF No. 34.
36. According to the March 27 Wolthoff declaration, DSLExtreme received the e-mail messages of December 20 and 24.
37. According to the March 27 Wolthoff declaration, VADI sent a detailed e-mail message to all of its ISP customers on January 8, 2003 explaining how to use the hot swap transition procedure, noting that it worked only for customers seeking dynamic IP addresses, and stating that VADI was working on a more efficient transition procedure for customers who wanted static IP addresses.
38. According to the March 27 Wolthoff declaration, on January 14, 2003, VADI sent an e-mail message to all of its ISP customers informing them that due to Verizon's network architecture in the western U.S. (including California), the hot swap transition procedure announced on January 8 would also work for DSL customers seeking static IP addresses.
39. According to the April 25, 2003 reply declaration of Thomas Wolthoff, DSL customers seeking static IP addresses comprise a different market than DSL customers seeking dynamic IP addresses, because a static IP address is necessary for maintaining a website. Static IP addresses are also more expensive than dynamic IP addresses.
40. According to the January 8 e-mail message sent by VADI to all of its ISP customers, all of DIRECTV's DSL subscribers were provisioned with static IP addresses.
41. According to the March 27 Wolthoff declaration, VADI always gave the same information concerning the hot swap procedure at the same time and in the same manner (via e-mail) to all of its ISP customers.
42. In their papers, complainants have not disputed any of the factual assertions summarized in FOF Nos. 34-40.
43. Because of the differences explained in FOF No. 39, it is very unlikely that during the January 8-14, 2003 period, Verizon Online would have been able to gain any DIRECTV customers as a result of the availability of the hot swap process.
44. According to the March 27 Wolthoff declaration, Verizon Online has never been able to use the hot swap process for customers seeking static IP addresses because of its own internal ordering system requirements.
45. No press release or other statement issued by VADI suggested that DIRECTV would shut down its DSL system on or about January 16, 2003. All of the press releases and other statements issued by VADI were consistent with a February 28, 2003 shutdown date for DIRECTV's DSL network.
1. Owing to the extensive factual record developed at the January 30, 2003, TRO hearing and to the detailed factual assertions contained in the March 27 and April 25, 2003, declarations of Mr. Wolthoff, the motions of SBC ASI, SBC California and VADI to dismiss the Amended Complaint are more nearly akin to motions for summary judgment.
2. Under § 2896 and the other provisions of the Pub. Util. Code relied on by complainants, the capacity of an advertisement to mislead consumers should be determined by how the advertisement would be understood by a reasonable or ordinary consumer, unless the advertisement is targeted at particularly vulnerable consumers.
3. Under § 2896 and the other provisions of the Pub. Util. Code relied on by complainants, if the alleged misrepresentations in an advertisement are such that no reasonable consumer could be misled by them because they amount to mere puffery, then judgment against the misleading advertising claim may be granted as a matter of law.
4. As a group, DSL subscribers are generally more sophisticated than reasonable consumers.
5. No reasonable consumer could be misled by the press release attached to the Amended Complaint as Exhibit 2 into believing that a customer choosing SBC Yahoo as his or her new DSL provider would experience any less downtime than a customer choosing an unaffiliated ISP as his or her new DSL provider, because the press release neither states nor implies any such comparison.
6. No reasonable consumer could be misled by the mailer attached to the Amended Complaint as Exhibit 6 into believing that a customer choosing SBC Yahoo as his or her new DSL provider would experience any less downtime than a customer choosing an unaffiliated ISP as his or her new DSL provider, because the mailer neither states nor implies any such comparison.
7. In view of Conclusion of Law (COL) Nos. 5 and 6, the claims of misleading advertising asserted in the Amended Complaint against SBC ASI and SBC alifornia should be dismissed as a matter of law.
8. In view of the uncontradicted testimony at the January 30 TRO hearing about how the CPSOS system's security features work, as described in FOF Nos. 27-28, complainants cannot continue to rely on Mr. Murphy's January 9, 2003 declaration to support their assertion that disconnection information about the customers of other ISPs is usually available on the CPSOS system.
9. In the absence of any evidence to support complainants' claims that SBC ASI unlawfully discriminated against non-affiliated ISPs by delaying the posting of information on the CPSOS system regarding the disconnect dates for DIRECTV's customers, these discrimination allegations should be dismissed.
10. In order to state a claim for unlawful discrimination under § 453(a) of the Pub. Util. Code, one must allege unreasonable discrimination among similarly-situated customers.
11. Because the Amended Complaint does not allege that SBCIS became aware of the February 28, 2003 shutdown date for DIRECTV's DSL system as a result of preferential treatment by SBC ASI, and because complainants have not disputed that SBCIS became aware of this date as a result of the preferred provider negotiations during December 2002, the Amended Complaint's claims of unlawful discrimination under § 453(a) based on SBC ASI's failure to disclose the February 28, 2003 shutdown date to all of its ISP customers should be dismissed.
12. The Amended Complaint's claims that SBC ASI's failure to disclose the February 28, 2003 shutdown date to its ISP customers also violated §§ 451 and 2896 of the Pub. Util. Code, should also be dismissed.
13. Because the Amended Complaint does not allege that Verizon Online became aware of the February 28, 2003 shutdown date for DIRECTV's DSL system as a result of preferential treatment by VADI, and because complainants have not disputed that Verizon Online became aware of this date by virtue of being a party to the Transition Agreement along with VADI and DIRECTV, the Amended Complaint's claims of unlawful discrimination based on VADI's alleged failure to disclose the February 28, 2003 shutdown date to all its ISP customers should be dismissed.
14. In addition to the reasons set forth in COL No. 13, the Amended Complaint's claims that VADI unlawfully discriminated based on its alleged failure to disclose DIRECTV's February 28, 2003 shutdown date to all ISP customers should be dismissed because on January 3, 2003, VADI sent an e-mail to all of its wholesale customers including DSLExtreme stating that DIRECTV's DSL system would remain in operation through February 28. DSLExtreme did not receive this e-mail because it had failed to keep its customer profile information with VADI up-to-date.
15. The claims in the Amended Complaint that VADI discriminated against DSLExtreme by not providing information about the hot swap transition procedure until January 8, 2003 should be dismissed, because the evidence offered by VADI and not disputed by complainants shows that (1) VADI informed its non-affiliated ISP customers beginning on December 20 that the hot swap process would take some time to develop, and (2) VADI disclosed the details of the hot swap process to all of its ISP customers, including Verizon Online, at the same time and in the same manner; i.e., through the January 8, 2003 e-mail message.
16. Because DSL subscribers seeking static IP addresses constitute a different market than DSL subscribers who are content with dynamic IP addresses, and because all DIRECTV DSL customers were provisioned with static IP addresses, it is very unlikely that Verizon Online gained any advantage in marketing its DSL service between January 8, 2003, when VADI informed its ISP customers that the hot swap process could only be used for dynamic IP addresses, and January 14, 2003, when VADI informed its ISP customers that the hot swap process could also be used for DSL subscribers seeking static IP addresses.
17. Because Verizon Online was unable to use the hot swap transition process for customers seeking static IP addresses due to the requirements of its own internal ordering systems, the January 14 announcement that the hot swap process could be used for DSL subscribers seeking static IP addresses put Verizon Online at a competitive disadvantage.
18. Because of the conclusions set forth in COL Nos. 16 and 17, the allegations in the Amended Complaint that VADI unlawfully discriminated against DSLExtreme by delaying until January 14, 2003 the announcement that the hot swap process could also be used for customers seeking static IP addresses, should be dismissed.
19. In view of the fact that the allegations in the Amended Complaint represent complainants' third attempt to state causes of action against SBC ASI and SBC California, and the fact that complainants did not pursue their allegations against VADI in the original TRO motion and have not disputed any of the material facts in the declarations supporting VADI's Motion to Dismiss the Amended Complaint, it would not be appropriate to afford complainants another opportunity to amend their complaint.
20. The Amended Complaint herein should be dismissed with prejudice, effective immediately.
IT IS ORDERED that:
1. The Amended Complaint in this proceeding dated February 19, 2003 is dismissed with prejudice.
2. Case 03-01-007 is closed.
This order is effective today.
Dated _____________________, at San Francisco, California.
