III. Review of the Proposed Application

Sphera's application has been reviewed for compliance with the certification-and-entry rules (Certification Rules) adopted in Appendices A and B of D.95-07-054 and subsequent decisions in R.95-04-043/I.95-04-044. The Certification Rules are intended to protect the public against unqualified or unscrupulous carriers, while also encouraging and easing the entry of CLC providers to promote the rapid growth of competition.

Sphera seeks authority to provide facilities-based and resold local exchange telecommunications services in the Pacific, Verizon, CTC, and RTC service areas as well as facilities-based and resold non-dominant interexchange telecommunications services throughout the State of California. Sphera proposes to provide these services through UNE facilities to be leased from other existing certificated carriers. Sphera is currently seeking only the limited facilities-based authority described in D.99-10-025 and D.99-12-050. Under this limited authority, Sphera will not construct any new or extend any existing outside plant in California to provide the services for which it seeks authority.

In this order, we will grant Sphera's request for limited facilities-based authority to provide local exchange services utilizing resale of other carriers' services and/or utilizing UNEs and/or equipment installed solely on or within existing buildings and structures.

Sphera has demonstrated that it possesses the requisite managerial qualifications and technical competence to provide local exchange service. Sphera was also required to submit proposed tariffs which conform to the consumer protection rules set forth in Appendix B of D.95-07-054. Upon review of the draft tariff, we have identified certain deficiencies as listed in Appendix B of this order. All outstanding tariff deficiencies identified in Appendix B must be corrected before Sphera may otherwise begin to offer service.

As prescribed in Certification Rule 4.B (1), prospective facilities-based CLCs must also show that they possess a minimum of $100,000 in cash or cash-equivalent resources. In order to demonstrate that it possesses the requisite financial resources, Sphera submitted the most recent financial statements of its parent company, Sphera Optical Networks, Inc. under seal as Exhibit 5. Applicant submitted under seal on a confidential basis its estimated number of customers as Exhibit 7.

Based upon our review, we conclude Sphera has satisfactorily complied with our certification requirements for limited facilities-based authority, subject to correcting any tariff deficiencies to be identified in Appendix B, and satisfying the additional conditions set forth in the ordering paragraphs below. Accordingly, we grant Sphera limited facilities-based authority to offer resale of other carriers' services utilizing UNEs and equipment located solely within existing structures. We also authorize Sphera to offer statewide interexchange service on a similar basis.

This is an uncontested matter in which the decision grants the relief requested. Accordingly, pursuant to Pub. Util. Code § 311(g)(2), the otherwise applicable 30-day period for public review and comment is being waived.

Findings of Fact

1. Sphera filed its application seeking a CPCN to provide competitive local exchange services in the territories of the major California LECs and interexchange services statewide.

2. There are no protests to the application.

3. In D.99-10-025, the Commission found that further inquiry was required to resolve the CEQA issues raised by the filed comments of public agencies before full facilities-based authority could be considered for then-pending CLC petitions.

4. Prior Commission decisions authorized competition in providing local exchange telecommunications service within the service territories of Pacific and Verizon for carriers meeting specified criteria.

5. Sphera has demonstrated that it has a minimum of $100,000 in cash or cash equivalent reasonably liquid and readily available to meet its start-up expenses.

6. Applicant's technical experience is demonstrated by supporting documentation which provides summary biographies of key management personnel.

7. By D.97-06-107, applicants for CLC authority are exempt from Rule 18(b).

8. Exemption from the provisions of Pub. Util. Code §§ 816-830 has been granted to other nondominant carriers. (See, e.g., D.86-10-007, and D.88-12-076.)

9. The transfer or encumbrance of property of nondominant carriers has been exempted from the requirements of Pub. Util. Code § 851 whenever such transfer or encumbrance serves to secure debt. (See D.85-11-044.)

10. The provision of local exchange telecommunications service by resale, or by the utilization of existing unbundled loops and electronic equipment located within or on existing buildings and structures will not have a significant effect on the environment.

11. Sphera has no immediate plans to construct facilities in California, and did not provide any description of proposed construction or extensions

Conclusions of Law

1. Sphera has the financial ability to provide the proposed services, and has made a reasonable showing of technical expertise in telecommunications.

2. Public convenience and necessity require the competitive local exchange services to be offered by Sphera subject to the terms, conditions, and restrictions set forth below.

3. Sphera must submit a complete draft of its initial tariff that complies with the requirements established by the Commission,that corrects any deficiencies identified in Appendix B and includes prohibitions on unreasonable deposit requirements.

4. Sphera is subject to:

a. The current 0.80% surcharge, changing to 1.45% effective July 1, 2001, applicable to all intrastate services except for those excluded by D.94-09-065, as modified by D.95-02-050, to fund the Universal Lifeline Telephone Service (Pub. Util. Code § 879; Resolution T-16412, May 18, 2000: Resolution T-16435, December 21, 2000);

b. The current 0.00% surcharge applicable to all intrastate services except for those excluded by D.94-09-065, as modified by D.95-02-050, to fund the California Relay Service and Communications Devices Fund (Pub. Util. Code § 2881; D.98-12-073 and Resolution T-16487, December 21, 2000);

c. The user fee provided in Pub. Util. Code §§ 431-435, which is 0.11% of gross intrastate revenue for the 2000-2001 fiscal year (Resolution M-4800);

d. The current surcharge applicable to all intrastate services except for those excluded by D.94-09-065, as modified by D.95-02-050, to fund the California High Cost Fund-A (Pub. Util. Code § 739.30; D.96-10-066, pp. 3-4, App. B, Rule 1.C; set by Resolution T-16380 at 0.0% for 2000, January 20, 2000);

e. The current 2.6% surcharge applicable to all intrastate services except for those excluded by D.94-09-065, as modified by D.95-02-050, to fund the California High Cost Fund-B (D.96-10-066, p. 191, App. B, Rule 6.F, Resolution T-16430, September 21, 2000); and

f. The current 0.185% surcharge applicable to all intrastate services except for those excluded by D.94-09-065, as modified by D.95-02-050, to fund the California Teleconnect Fund (D.96-10-066, p. 88, App. B, Rule 8.G; set by Resolution T-16437, September 21, 2000).

7. Applicant should be exempted from Pub. Util. Code § 851 when the transfer or encumbrance serves to secure debt.

8. Applicant should be granted a CPCN for local exchange resale service and limited facilities-based service utilizing UNEs and equipment installed within existing buildings or structures subject to the terms, conditions, and restrictions set forth in the order below.

9. At such time in the future that Sphera seeks to engage in the construction of facilities to be used in the provision of local exchange service, Sphera shall first be required to file a new application seeking to expand the limited facilities-based CPCN authority granted in this order. The application shall include a PEA providing a detailed description of the proposed construction.

10. Sphera shall fully comply with CEQA requirements.

11. Any CLC which does not comply with our rules for local exchange competition adopted in R.95-04-043 shall be subject to sanctions including, but not limited to, revocation of its CLC certificate.

ORDER

IT IS ORDERED that:

1. A certificate of public convenience and necessity (CPCN), shall be granted to Sphera Optical Networks N.A., Inc. d/b/a Sphera Networkds (Sphera or Applicant) to provide resale and limited facilities-based local exchange telecommunications services utilizing unbundled network elements and equipment installed solely within or on existing buildings and structures within the service territories of Pacific Bell (Pacific), Verizon California Inc. (Verizon), Roseville Telephone Company (RTC), and Citizens Telephone Company (CTC) and interexchange authority on a statewide basis, contingent on compliance with the terms identified in this order.

2. Authorization for full facilities-based authority involving construction work will require the filing of a new application in conformance with California Environmental Quality Act requirements.

3. Applicant shall file a written acceptance of the certificate granted in this proceeding prior to commencing service in the prescribed territories.

4. Applicant shall correct the outstanding tariff deficiencies identified in Appendix B prior to being authorized to begin service.

5. a. Applicant is authorized to file with this Commission tariff schedules (incorporating Appendix B corrections) for the provisioning of competitive local exchange services, as described in Ordering Paragraph 1. The Applicant may not offer these services until tariffs are on file, and until any applicable deficiencies have been corrected. Applicant's initial filing shall be made in accordance with General Order (GO) 96-A, excluding Sections IV, V, and VI, and shall be effective not less than one day after approval by the Telecommunications Division.

A. "E. CLCs shall be subject to the following tariff and contract-filing, revision and service-pricing standards:

"(1) Uniform rate reductions for existing tariff services shall become effective on five (5) working days' notice to the Commission. Customer notification is not required for rate decreases.

"(2) Uniform major rate increase for existing tariff services shall become effective on thirty (30) days' notice to the Commission, and shall require bill inserts, or a message on the bill itself, or first class mail notice to customers at least 30 days in advance of the pending rate increase.

"(3) Uniform minor rate increase, as defined in D.95-07-054, shall become effective on not less than five (5) working days' notice to the Commission. Customer notification is not required for such minor rate increases.

"(4) Advice letter filing for new services and for all other types of tariff revisions, except changes in text not affecting rates or relocations of text in the tariff schedules, shall become effective on forty (40) days' notice to the Commission.

"(5) Advice letter filings revising the text or location of text material which do not result in an increase in any rate or charge shall become effective on not less than five (5) days' notice to the Commission.

"(6) Contracts shall be subject to GO 96-A rules for NDIECs, except interconnection contracts.

"(7) CLCs shall file tariffs in accordance with PU Code Section 876."

6. Applicant may deviate from the following provisions of GO 96-A: (a) paragraph II.C.(1)(b), which requires consecutive sheet numbering and prohibits the reuse of sheet numbers, and (b) paragraph II.C.(4), which requires that "a separate sheet or series of sheets should be used for each rule." Tariff filings incorporating these deviations shall be subject to the approval of the Commission's Telecommunications Division. Tariff filings shall reflect all fees and surcharges to which Applicant is subject, as described in Conclusion of Law 4. Applicant is also exempt from GO 96-A Section III.G.(1) and (2), which require service of advice letters on competing and adjacent utilities, unless such utilities have specifically requested such service.

7. Applicant shall file as part of its initial tariffs, after the effective date of this order and consistent with Ordering Paragraph 3, a service area map.

8. Prior to initiating service, Applicant shall provide the Commission's Consumer Services Division with Applicant's designated contact persons for purposes of resolving consumer complaints and the corresponding telephone numbers. This information shall be updated if the names or telephone numbers change or at least annually.

9. Applicant shall notify this Commission in writing of the date local exchange service is first rendered to the public within five days after service begins. The same procedure shall be followed for the authorized intraLATA and interLATA services, where applicable.

10. Applicant shall keep its books and records in accordance with generally accepted accounting principles.

11. Applicant shall file an annual report, in compliance with GO 104-A, on a calendar-year basis using the information-request form developed by the Commission Staff and contained in Appendix A.

12. Applicant shall ensure that its employees comply with the provisions of Pub. Util. Code § 2889.5 regarding solicitation of customers.

13. The certificate granted and the authority to render service under the rates, charges, and rules authorized will expire if not exercised within 12 months after the effective date of this order.

14. The corporate identification number assigned to Applicant is U-6476-C, which shall be included in the caption of all original filings with this Commission, and in the titles of other pleadings filed in existing cases.

15. Within 60 days of the effective date of this order, Applicant shall comply with Pub. Util. Code § 708, Employee Identification Cards, reflecting its authority, and notify the Director of the Telecommunications Division (TD) in writing of its compliance.

16. Applicant is exempted from the provisions of Pub. Util. Code §§ 816-830.

17. Applicant is exempted from Pub. Util. Code § 851 for the transfer or encumbrance of property, whenever such transfer or encumbrance serves to secure debt.

18. If Applicant is 90 days or more late in filing an annual report or in remitting the fees listed in Conclusion of Law 4, the TD shall prepare for Commission consideration a resolution that revokes that petitioner's CPCN, unless it has received written permission from the TD to file or remit late.

19. It can be seen with certainty that no material adverse environmental impacts will result from the limited CPCN authority granted in this order.

20. Applicant shall comply with all applicable rules adopted in the Local Exchange Competition proceeding (R.95-04-043, I.95-04-044), the Commission's rules and regulations for NDIECs set forth in D.93-05-010 and D.90-08-032, as well as all other applicable Commission rules, decisions, General Orders, and statutes that pertain to California public utilities, subject to the exemptions granted in this decision.

21. Applicant's motion for a limited protective order keeping confidential the designated exhibits containing financial information and estimated customer information is granted. Such exhibits will remain under seal for two years from today unless Applicant makes a timely request for extension of confidential treatment by filing a separate motion with good cause shown.

22. The application of Sphera's is granted only as set forth above.

23. Application 00-09-035 is closed.

This order is effective today.

Dated , at San Francisco, California.

TO: ALL COMPETITIVE LOCAL CARRIERS AND INTEREXCHANGE

TELEPHONE UTILITIES

Article 5 of the Public Utilities Code grants authority to the California Public Utilities Commission to require all public utilities doing business in California to file reports as specified by the Commission on the utilities' California operations.

A specific annual report form has not yet been prescribed for the California interexchange telephone utilities. However, you are hereby directed to submit an original and two copies of the information requested in Attachment A no later than March 31st of the year following the calendar year for which the annual report is submitted.

Address your report to:

Failure to file this information on time may result in a penalty as provided for in §§ 2107 and 2108 of the Public Utilities Code.

If you have any question concerning this matter, please call (415) 703-1961.

APPENDIX A

Information Requested of California Competitive Local Carriers and Interexchange Telephone Utilities.

To be filed with the California Public Utilities Commission, 505 Van Ness Avenue, Room 3251, San Francisco, CA 94102-3298, no later than March 31st of the year following the calendar year for which the annual report is submitted.

(END OF APPENDIX A)

APPENDIX B

Page 1

List of deficiencies in tariff filed by Sphera Optical Networks N.A., Inc. d/b/a Sphera Networks in A.00-09-035 to be corrected in Tariff Compliance filing.

1. Modify the top right-hand corner of every tariff sheet to conform with GO 96-A. Refer to GO 96-A, page 4. Also, include the words "Schedule Cal. P.U.C. No.1-T" on the top right hand corner of every tariff sheet.

2. Applicable Taxes and Surcharges: The correct CRS/CDF surcharge should be 0.00%, instead of 0.192%.

3. Universal Lifeline Telephone Service: Include the following corrected Income Limitation and rates for ULTS:

4. Rule 7, Deposits: Remove the last sentence from Rule 7.1 of the tariff and include the following "Deposits shall be no greater than twice the estimated average monthly bill for the class of service applied for. In the event a customer requests services in addition to basic service, the average bill will reflect the aggregate services requested by the customer". Refer to Rule 5 of Appendix B of D.95-07-054.

5. Rule 7.2, Deposits: The following criteria for advance payments needs to be included in the tariff: "The advance payment will not exceed the nonrecurring and the first month's recurring rate. Advance payments will not be required for usage. In addition, where special construction is involved, the advance payment may also include an amount equal to the estimated non-recurring charges. The advance payment will be credited to the Customer's first bill.

APPENDIX B

Page 2

6. Rule 7, Deposits: Remove Rules 7.3 and 7.4 from the tariff and include the following "Deposits will be refunded with interest within 30 days after discontinuance of service or after 12 months of service, whichever comes first. Interest will be added to the deposits using the three-month commercial paper rate published by the Federal Reserve Board. Refer to Rule 5 of Appendix B of D.95-07-054.

7. Rule 11.1, Discontinuance and Restoration of Service: Remove the words "without incurring any liability from the tariff." CLC needs to concur with Pacific or GTEC's Limitation of Liability tariff. Refer to D.95-12-057.

8. Rule 11, Discontinuance and Restoration of Service: Include Rule 10A(3) from Appendix B of D.95-07-054 into the tariff.

9. Rule 17, Liability of Carrier: Remove the last paragraph of the Liability of Carrier Rule from the tariff. CLC needs to concur with Pacific or GTEC's Limitation of Liability tariff. Refer to D.95-12-057.

10. Rule 18, Cancellation or Interruption of Service: Remove Rule 18.3 from the tariff and include Pacific or GTEC's Limitation of Liability tariff regarding credit for service interruption. Refer to D.95-12-057.

11. Rule 35, Blocking Access to 900 and 976 Information Services: CLC needs to state in the tariff that blocking shall be made available free of charge to residential customers, although CLC may impose a charge if the customer asks for deactivation of blocking. Refer to Rule 15 of Appendix B of D.95-07-054.

12. Include rule on how telephone directories will be provisioned to residential and business customers.

13. Include Rule 11 of Appendix B of D.95-07-054 into the tariff.

14. Remove the Los Angeles Consumer Affairs Branch address found in Rule 5 and 10 of the tariff.

15. Tariff must be available for inspection at an office in California.

(END OF APPENDIX B)

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