ALJ/MOD-POD/XJV/tcg DRAFT Agenda ID #3199
Adjudicatory
9/2/2004 Item 34
Decision __________
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Investigation on the Commission's own motion into the operations, practices, and conduct of Pacific Bell Wireless LLC dba Cingular Wireless, U-3060, U-4135 and U-4314, and related entities (collectively "Cingular") to determine whether Cingular has violated the laws, rules and regulations of this State in its sale of cellular telephone equipment and service and its collection of an Early Termination Fee and other penalties from consumers. |
Investigation 02-06-003 (Filed June 6, 2002) |
Christopher P. Witteman, for the Consumer Protection and Safety Division of the California Public Utilities Commission.
James W. McTarnaghan, Kathryn A. Fugere and Sarah E. Leeper, Steefel, Levit & Weiss, for Cingular Wireless, respondent.
Michael Shames and Lee Biddle, for Utility Consumers' Action Network, intervenor.
OPINION ORDERING PENALTIES AND REPARATIONS
TABLE OF CONTENTS
Title Page
OPINION ORDERING PENALTIES AND REPARATIONS 1
1. Summary 2
2. Overview 3
2.1 The OII 3
2.2 Cingular's Business Organization and California Presence 5
2.3 Brief Description of Cingular's Wireless Service 6
3. Procedural Background 7
4. Jurisdiction and Burden of Proof 8
4.1 Subject Matter Jurisdiction 8
4.2 Burden of Proof 13
5. Summary of the Evidentiary Record 13
5.1 Customer Growth and Network Development 14
5.2 Marketing and Sales Practices 20
5.2.1 Store Design, Marketing Materials and Sales Disclosures 20
5.2.2 Agent Contracts 27
5.2.3 Wireless Handsets and Other Equipment 28
5.3 Advertising 30
5.4 Customers' Complaints 35
5.4.1 Customer Witnesses 35
5.4.2 Informal Complaints to CAB 41
5.4.3 UCAN Complaint Database 43
5.4.4 UCAN's Deadzone Project 44
5.4.5 Complaints to the Attorney General's Office 44
5.4.6 Cingular's Cross Streets Records 45
5.4.7 Internet Petition Signatories 47
6. Discussion 48
6.1 Violation of the Public Utilities Code and D.95-04-028 48
6.1.1 Section 451 -- Just and Reasonable Service Mandate 48
6.1.2 Section 451/Section 2896 - Required Disclosure 55
6.1.3 Section 451/D.95-04-028 - Bundling Decision Compliance 60
6.1.4 Other Issues 61
6.2 Remedies 62
7. Assignment of Proceeding 72
8. Appeals of POD and Briefs of the Amici Curiae 72
8.1 § 451 Challenges 73
8.2 § 2896 Challenges 77
8.3 Miscellaneous Corrections 79
Findings of Fact 79
Conclusions of Law 82
O R D E R 84
Appendix 1: I.02-06-003, Ordering Paragraph 1, as Modified by D.02-10-061
Appendix 2: Matrix of CPSD and UCAN Declarants
Appendix 3: Customer Witnesses' Service Quality Problems by Month and Year
PENALTIES AND REPARATIONS
1. Summary
The evidence establishes that at least as early as January 1, 2000 and continuing until May 1, 2002, when Cingular Wireless (Cingular) implemented a new, 15-day refund/return policy, its corporate policy and practice in California did not allow any "grace period" or trial of its wireless service. Furthermore, Cingular's corporate policy prohibited early termination of wireless service contracts unless the customer paid an early termination fee (ETF) of $150. Some Cingular agents imposed an additional ETF of as much as $400, which increased the total ETF to as much as $550. Given Cingular's own testimony that testing wireless service by using the phone is the best way for a customer to ascertain whether the service meets his or her needs, binding that customer in advance to a one or two-year contract constituted an unjust and unreasonable rule and resulted in inadequate, unjust, and unreasonable service in violation of Pub. Util. Code § 451.1 This policy and practice also violated Decision (D.) 95-04-028, a prior Commission decision.
Cingular's corporate practice became even more egregious during 2001, when Cingular concedes it experienced significant network development growing pains. During 2001, Cingular's engineering department struggled to add coverage and capacity to keep pace with significant increases in customers and monthly usage, largely attributable to Cingular's successful advertising and marketing efforts. Cingular made no effort to disclose its network problems to customers by any means and, in spite of these problems, continued to prohibit returns/refunds and required ETFs for early cancellation of wireless service contracts. This disclosure failure violated §§ 451, 702 and 2896 and D.95-04-028.
We find that the totality of the evidence presented by Cingular, the Commission's Consumer Protection and Safety Division (CPSD) and intervenor Utility Consumers Action Network (UCAN) establishes that these violations were continuing ones, for which we fine Cingular $10,000 per day. The total penalty is $12,140,000.
We also order Cingular to reimburse customers who paid part or all of the ETF to Cingular or to one of Cingular's agents during this period. Because other proposed remedies are the subject of two industry-wide rulemakings that concern (1) consumer rights and protections for telecommunication customers, and (2) telecommunications service quality standards, we defer consideration and adoption of such remedies to those proceedings.
This proceeding is closed.
1 Unless otherwise indicated, all subsequent citations to sections refer to the Public Utilities Code, and all subsequent citations to rules refer to the Rules of Practice and Procedure, which are codified at Chapter 1, Division 1 of Title 20 of the California Code of Regulations.
