III. Discussion
The application before us raises two major issues. First, should the Commission grant Cable & Wireless the authority to withdraw its CPCN to provide resold local exchange services to customers in the State of California? Second, if so, does the customer notification plan proposed by Cable & Wireless meet the minimum established notice requirements set in D.97-06-096?
A. Commission Authorization to Withdraw Resold Local Exchange Service
According to GO 96-A, Section XIV, "No public utility of a class specified herein shall, unless authority has been obtained from the Commission, either withdraw entirely from public service or withdraw from public service in any portion of the territory served." Thus, Cable & Wireless is required to continue to offer local exchange service to existing customers until or unless authorized to discontinue it by this Commission.
As previously discussed in D.01-06-036, it is disheartening to find Competitive Local Exchange Carriers ("CLEC") looking for ways to exit the local service market rather than seeking to expand their customer bases given our efforts over the past several years to promote the growth of competitive alternatives for consumers. We regret that carriers are filing applications intended to diminish, rather than increase, the competitive choices available to local customers.
The proposed withdrawal of local exchange service by Cable & Wireless raises the issue of a public utility's continuing obligation to serve and the rights of customers to uninterrupted, reliable, and reasonably priced telephone service. Prior to the opening of local telecommunications markets to competitive entry, the continuing obligation to serve was generally imposed on one monopoly provider in a local exchange service territory. The monopoly provider did not realistically have the option of discontinuing service to customers in order to seek more profitable opportunities in other lines of business or to limit service only to market segments generating high profits.
If Cable & Wireless were a monopoly provider, there would be no question of its obligation to continue to provide service to its local customers. Cable & Wireless, however, is not a monopoly provider, but a carrier competing with the ILEC and any other CLECs that may be offering service in the same region. Thus, we must evaluate Cable & Wireless's request to withdraw from service in the context of the rules and framework that have been adopted for competitive carriers.
Our rules for local exchange competition adopted in 1995 were aimed at promoting market flexibility to encourage new carriers to enter the market and provide greater competitive choices for consumers.3 At the time we adopted these rules, we could not guarantee that competitors would in fact enter every local market, or that once a CLEC entered a local market, it would never change marketing strategy, or never choose to exit the market. Commission rules permit greater regulatory flexibility to CLECs in contrast to incumbents in the interest of fostering a competitive market. In a competitive market, individual carriers may enter and exit the market over time.
In 1995, we opened the "Universal Service" proceeding (R.95-01-020/I.95-01-021) to ensure that universal service goals were preserved as we moved from a monopoly environment into a competitive arena for telecommunications services. In D.95-07-050, we identified two principal goals with respective to universal service: (1) that a certain minimum level of telecommunications services be made available to everyone in the state, and (2) that the rate for such services remain affordable.
Related to the concept of universal service is the concept of "carrier of last resort" (COLR). As we stated in D.96-10-066: " The COLR is a regulatory concept rooted in the idea that by accepting the franchise obligation from the state to serve a particular area, the public utility is obligated to serve all the customers in the service area who request service. The COLR concept is important to Universal Service policy because it ensures that customers receive service."
Under the competitive framework developed in our Universal Service Rules adopted in D.96-10-066, we designated the ILECs as the COLR in their respective territories. In contrast to the COLR, a CLEC is not bound by the same obligation to serve a given local market, but is free to tailor its marketing to serve only certain segments, as long as there is no unfair discrimination. The market entry or exit of individual CLECs does not jeopardize the Commission's Universal Service goals as long as the COLR meets its obligation to serve customers, including those that may have been served previously by a CLEC that exited the market.
Until Cable & Wireless decided to file an application seeking to withdraw from local service, customers in the Cable & Wireless service territory benefited by having Cable & Wireless service as a competitive alternative to ILEC offerings. Ideally, Cable & Wireless would continue to offer such service voluntarily based upon the competitive market incentives in place. Yet, just as our rules do not compel CLECs to enter into local exchange markets that they choose not to serve, neither can we obligate a CLEC, such as Cable & Wireless, to continue indefinitely to serve a market sector that it does not wish to serve. It would be improper to require Cable & Wireless to continue to serve the local market, as we have not required other CLECs to provide local service involuntarily where they are not a COLR. Such action would be unlawful because we are prohibited under the Telecommunications Act of 1996 from discriminating arbitrarily or unfairly in administering the rules governing to local carriers. (47 U.S.C. Section 253(b).)
In this instance, the COLR in the service territories served by Cable & Wireless is the underlying ILEC, either Pacific Bell Telephone Company (Pacific) or Verizon California Inc. (Verizon). As a condition of allowing withdrawal from the local exchange market, we will require Cable & Wireless to transfer to the underlying ILEC any of its customers who have not chosen another provider within 30-days of receiving notification from Cable & Wireless. Likewise, Pacific and Verizon are directed to accept all customers transferred to them from Cable & Wireless, subject to the ILECs' existing rights of termination after proper notice.
This requirement for the Company to transfer any remaining customers to the ILEC if they have not selected another carrier is consistent with our handling of other recent applications for withdrawal of service. (See, e.g., our recent decision authorizing the withdrawal of Verizon Select Services, Inc., D.01-06-036.) Moreover, this requirement will ensure that Cable & Wireless' current customers will continue to have uninterrupted service. Even though the rates and terms that the COLR (i.e., the ILEC) currently offers for a bundle of services may be higher than the bundled service offered by Cable & Wireless, the ILEC service still remains subject to price-cap and service quality regulations of the Commission. Thus, customers that are switched from Cable & Wireless to an ILEC remain protected against unreasonably high rate increases or inadequate service quality by the rules applicable to ILEC's.
In summary, Cable & Wireless may withdraw after providing customers with 30-days' notice to provide time for customers make arrangements with another carrier, and after transferring any customers that do not select another carrier to the underlying ILEC. Cable & Wireless may not disconnect any customer for failure to choose another provider.
B. The Customer Notice Process
Customers are entitled to be properly informed about their options when a carrier seeks to exit from the local market. In D.01-06-036, we found that the notice requirements of D.97-06-096 apply when a carrier is withdrawing from service and transferring any remaining customers to the ILEC. (D.01-06-036, COL 3, pg. 21).4
According to the customer notification plan proposed by Cable & Wireless, it will provide its customers with more than the requisite thirty (30) days notice, during which time it will have sent at least three (3) notifications to all affected customers. The notification will provide customers with information on how to choose a substitute local exchange provider, and will provide a toll-free customer assistance number staffed by personnel able to address any questions or concerns. Cable & Wireless does not intend to sell its customers to any particular carrier, but will allow customers to select a new service provider on their own. The notification plan also provides for a verbal follow-up with any customers who have not chosen an alternative provider.
We conclude that Cable & Wireless' proposed notification process satisfies the requirements established in D.97-06-096, provided any remaining customers are transferred to the underlying ILEC at the end of the 30-day notice period. The initial notification reasonably explained that Commission approval was required and that the date for discontinuance of service was "anticipated," and "pending CPUC approval." While we would prefer that an initial notice make clear that customers will receive another notice before service is actually discontinued, we appreciate the company's efforts to give its customers advance notification of service changes.
3 See D.95-07-054.
4 Public Utilities Code Section 2889.5 imposes numerous requirements prior to any person, firm, or corporation changing a customer's telephone service. In D.97-12-119, the Commission determined that Section 2889.5 does not apply to customer base transfers.
