VIII. Application Fee

Public Utilities Code § 5840(c) declares that "[t]he commission may impose a fee on the applicant that shall not exceed the actual and reasonable costs of processing the application and shall not be levied for general revenue purposes." Pursuant to this statutory authority, the OIR tentatively concluded that an application fee of $2,000 would be sufficient to recover the costs of processing an application.

Parties suggest various changes to the Commission's administration of its application fee, including the following: increasing the fee; basing the fee on the size of the proposed service area; and assessing the application fee on tasks other than an initial application. We review and analyze these comments below.

A. Position of the Parties

Joint Cities contends that the Commission's proposed application fee of $2,000 is grossly underestimated.282 Joint Cities explains that the Commission's proposed fee is far lower than the fee charges by local franchising authorities.283 According to Joint Cities, the Commission has "gravely underestimated" the number of hours that the Commission "will actually be required to devote to the few franchise applications submitted to [the] Commission in 2007."284 Joint Cities argues that an "initial application fee of $7,500 to $10,000 would likely better reflect the Commission's actual costs."285 Joint Cities adds that the Commission could offset a portion of the user fee if it raised the application fee.286

In addition, Joint Cities argues that the Commission's decision to "forego application fees for other types of Commission activity required by franchisee requests is against the public interest."287 Joint Cities maintains that state video franchise holders that "create additional work for the Commission should be required to provide the appropriate remuneration to the Commission."288

Pasadena declares that the Commission's proposed application fee is "significantly underestimated."289 The city explains that its initial application fee is set at $15,000 in order to "cover basic staff time reviewing franchise applications."290 Based on its experience, Pasadena asserts that a higher application fee "would more accurately reflect the Commission's actual review costs."291 Pasadena also argues that the Commission could reduce the user fee if it raised the application fee.292

Verizon maintains that the Commission's proposed application fee should not be compared to the fee assessed by the local franchising authorities, because the "state franchising process is quite different and far more ministerial."293 Verizon contends that the local franchising authorities' "costs of funding consultants and attorneys in lengthy local franchise negotiations and review processes bears no relation to the Commission's streamlined process."294

Verizon adds that the Commission should not assess application fees on franchise-related processes, such as service territory amendments and change of control notifications.295 According to Verizon, "[m]ost of these functions are subject to the notice provisions of section 5840(m), not the application review process of section 5840(h). Therefore, another application fee is not authorized."296

SureWest maintains that a standard application fee for all applications is inappropriate. It argues that "applicants requesting a state-issued franchise for larger service areas will require substantially more review by the Commission," and a one-size-fits-all application fee may result in larger companies being subsidized by smaller ones.297 Accordingly, SureWest urges the Commission to "charge an application fee for any application, whether it is an initial application, an amendment or a renewal, and the charge should be based on . . . criteria that is more reflective of the cost the Commission will incur in processing the particular application."298 SureWest suggests calculating the application fee based on "the number of households in an applicant's proposed service area."299

B. Discussion

We decline to modify the amount of our application fee or assess an application fee for anything other than an application for an initial or renewed state franchise. We conclude that the proposed application fee of $2,000 is reasonable for recovering our costs to process an application. We expect that this amount will compensate us for forty hours of employee time when the employee's compensation, including benefits, will cost the state approximately $100,000 per year.

We agree with Verizon's assertion that "state franchising process is quite different" from the franchising process at the local level.300 As explained in Section IX, DIVCA has established an application review process that is streamlined and strictly limited in duration.301 We expect that forty hours of staff time will be sufficient to review a state franchise application under these conditions. Moreover, we note that if actual workload related to the application review process differs from the Commission's estimates, the Commission has the statutory authority to revisit its calculation of the application fee.

SureWest did not convince us that the size of an applicant's proposed video service area will have a significant impact on the amount of staff resources needed to determine whether an application is complete. When arguing that we align the application fee with the size of an applicant's proposed video service territory, SureWest failed to give any detail on how much the size of a proposed video service area would affect the length of time necessary for application review.302

We further find that collecting application fees for additional specific Commission activities is outside the scope of our statutory authority.303 While DIVCA states that the Commission may assess a fee to recover the "actual and reasonable costs of processing the application," DIVCA contains no provision that authorizes the Commission to assess fees for individual tasks other than application review.304 DIVCA explicitly contemplates that the remainder of the costs of administering the state video franchise program will be recovered through our annual user fee.305

282 Joint Cities Opening Comments at 16.

283 Id.

284 Id.

285 Id.

286 Id.

287 Id.

288 Id. at 17.

289 Pasadena Opening Comments at 4.

290 Id. at 4-5.

291 Id.

292 Id. at 5.

293 Verizon Reply Comments at 10.

294 Id. at 10, n.37.

295 Id. at 11.

296 Id.

297 SureWest Opening Comments at 13.

298 Id. at 14.

299 Id.

300 Verizon Reply Comments at 10. Verizon rebuts Pasadena's and Joint Cities' requests to raise the application fee. See Joint Cities Opening Comments at 16 (urging the Commission to increase the amount of the application fee); Pasadena Opening Comments at 4-5 (same).

301 Cal. Pub. Util. Code § 5840(h).

302 SureWest Opening Comments at 14.

303 Extending the scope of application fees was supported by Joint Cities and Pasadena. Joint Cities Opening Comments at 16; Pasadena Opening Comments at 5.

304 Cal. Pub. Util. Code § 5840(c).

305 See id. at § 401(b) (stating that the Legislature intended for the user fee to fund the Commission's "authorized expenditures for each fiscal year to regulate . . . applicants and holders of a state franchise"); id. at § 441 ("The annual fee shall be established to produce a total amount equal to that amount established in the authorized commission budget for the same year . . . less the amount to be paid from reimbursements, federal funds, and any other revenues, and the amount of unencumbered funds from the preceding year.").

Previous PageTop Of PageNext PageGo To First Page