XV. Enforcement of Statutory Provisions
Parties' comments on the draft General Order establish that there is significant public interest in the details regarding how we plan to enforce DIVCA. We agree that more information on enforcement will not only better inform and guide all parties, but it will highlight this Commission's resolve to enforce the law vigorously. Thus, this section and Section XIII (Reporting Requirements) provide further detail on how we intend to enforce provisions of DIVCA.
In this section, we describe the Commission's authority to enforce DIVCA provisions and review specific procedures that the Commission will use to guide its administration of the statute. We also clarify the role of DRA in the administration of DIVCA.
A. Enforcement Actions Pursuant to Division 2.5
Division 2.5 of DIVCA establishes most of the Commission's responsibilities as the state video franchising authority.617 Division 2.5 gives the Commission the ability to promulgate rules on franchising, antidiscrimination, and reporting. It also instructs the Commission to prevent any rate increases for stand-alone, residential, primary line, basic telephone services that will finance the deployment of video services.
Public Utilities Code § 5890(g) outlines key actions the Commission may take to enforce Division 2.5:
Local governments may bring complaints to the state franchising authority that a holder is not offering video service as required by this section, or the state franchising authority may open an investigation on its own motion. The state franchising authority shall hold public hearings before issuing a decision. The commission may suspend or revoke the franchise if the holder fails to comply with the provisions of this division.618
The OIR relied on Section 5890 when reaching tentative conclusions regarding the scope of our authority to resolve complaints by local governments, open an investigation on our own motion, hold public hearings, and suspend or revoke a state video franchise.
AT&T argues that the OIR defined the scope of our investigative authority too broadly. AT&T bases its position on the following portion of Public Utilities Code § 5890(g) (emphasis added): "Local governments may bring complaints to the state franchising authority that the holder is not offering video service as required by this section or the state franchising authority may open an investigation on its own motion."619 According to AT&T, the text of this provision "must be read in context to mean that local governments may complain regarding matters `required by this section' or the Commission may investigate regarding matters `required by this section.' To conclude otherwise implies language that is simply not there, namely that the Commission has authority to open an investigation on its own motion regarding `any matter addressed by the AB 2987.'"620
CCTA similarly argues that the investigative authority of the Commission is limited. Reviewing Public Utilities Code § 5890(g), CCTA concludes that "complaints filed at the Commission by local government, and the Commission's ability to open investigations on its own motion, are both limited to the issue of nondiscriminatory access, and do not extend to all provisions of the legislation."621 CCTA adds that to "read the Legislation to authorize Commission review of all requirements under the bill unlawfully expands the Commission's authority.622
In contrast, DRA argues that we have authority to institute investigations on any matter within the scope of Division 2.5 of DIVCA. DRA states that its opposition is incorrect when it asserts that "nothing in . . . the bill . . . provides the Commission the authority to open investigations on issues outside § 5890."623 Rebutting the communications companies, DRA points to the text of Public Utilities Code § 5890(g):
[T]he statutory language not only refers to complaints from local governments regarding the requirements of "this section," meaning § 5890, but also to the authority of the Commission to "suspend or revoke the franchise if the holder fails to comply with the provisions of this division." "This division" refers to the new Division 2.5 of the Public Utilities Code, The Digital Infrastructure and Video Competition Act of 2006, which is the entire video franchising law, not merely one section of it.624
DRA concludes that we have broad investigative authority, pursuant to the broad revocation authority granted by Public Utilities Code § 5890(g).
TURN argues that it "undermines the legislative intent" to limit the Commission's investigative powers to issues related to possible discrimination.625 According to TURN, it is "absurd" and "illogical" that DIVCA would prohibit cross-subsidization and give DRA authority to advocate on a variety of matters without granting the Commission authority to investigate corresponding issues.626 TURN adds that to "limit the Commission inherent investigative powers would directly contravene" the principle that DIVCA is intended to "maintain all existing authority of the . . . Commission as established in state and federal statutes."627
CCTPG/LIF asserts that nothing "in § 5890(g) restricts local governments from complaining, or restricts Commission investigative authority, to the issue of build out."628 As "demonstrated by the provisions of DRA advocacy regarding § 5900 and § 5950, as well as § 5890," CCTPG/LIF states "Commission regulatory and investigative authority extends to at least all of these areas."629
Public Utilities Code § 5890(g) provides that the scope of our revocation authority extends to all provisions of "this division," i.e., Division 2.5. Accordingly, we conclude that the Commission may suspend or revoke a state video franchise if it finds any of the following:
a. The state video franchise holder has failed to comply with any demand, ruling, or requirement of the Commission made pursuant to and within the authority of Division 2.5.
b. The state video franchise holder has violated any provision of Division 2.5 or any rule or regulation made by the Commission under and within the authority of this division.
c. A fact or condition exists that, if it had existed at the time of the original application for the state franchise (or transfer or renewal thereof), reasonably would have warranted the Commission's refusal to issue the state video franchise originally (or grant the transfer or renewal thereof).
Like CCTPG/LIF, DRA, and TURN, we interpret Public Utilities Code § 5890(g) to give us broad authority to suspend or revoke a state video franchise.630
We find, however, that our investigative authority is not similarly broad. DIVCA expressly restricts our use of other enforcement actions. With respect to Division 2.5 provisions, we have specific authority to impose a fine when a state video franchise holder is in violation of Public Utilities Code § 5890.631 We are given authority to address local entities' complaints only when the complaints arise under Public Utilities Code § 5890.632
The scope of our authority to initiate an investigation is less defined. Public Utilities Code § 5890(g) provides that "the state franchising authority may open an investigation on its own motion." But unlike the other enforcement actions described above, DIVCA is silent on the scope of our authority to initiate an investigation. Thus, we look to other DIVCA provisions to clarify the extent of this enforcement authority.
Our authority to regulate, as expressly identified and assigned in DIVCA, serves as a marker of the scope of our authority to enforce statutory and regulatory provisions. DIVCA endows the Commission with authority to regulate franchising (§§ 5840 and 5950), antidiscrimination (§ 5890), reporting (§§ 5920 and 5960), the prohibition on the use of rate increases for stand-alone, residential, primary line, basic telephone services to finance video deployment (§§ 5940 and 5950), and annual user fees (§ 401, §§ 440-444, § 5840). For other provisions, the Commission lacks explicit regulatory authority. Localities are afforded the authority to regulate collection and payment of franchise fees (§ 5860), PEG channel requirements (§ 5870), the Emergency Alert System (§ 5880), and, notably, federal and state customer service and protection standards (§ 5900).
This statutory guidance convinces us that no party appropriately characterizes the scope of our investigative authority. Those arguing that we may initiate investigations only if Public Utilities Code § 5890 is implicated fail to consider the other provisions we are charged with regulating. Those contending that we may initiate investigations regarding any portion of Division 2.5 confuse our statutory authority to initiate investigations with our authority to revoke a state video franchise.
Our review of our regulatory authority persuades us that the Commission only may initiate investigations regarding franchising; antidiscrimination and build-out; reporting; annual user fees; and the prohibition on the use of rate increases for stand-alone, residential, primary line, basic telephone services to finance video deployment.633 It would make little sense for us to initiate an investigation if we do not have authority to regulate in response to investigative findings. Matters regulated by local entities should be investigated by local entities. In these instances, local entities are best able to tailor enforcement actions to the facts of a particular case. Indeed, DIVCA expressly anticipates that enforcement of the Act's provisions often will be resolved in courts, which serve as a venue for local entities to pursue claims against state video franchise holders.634
These limits on our ability to initiate investigations guide our determination of when we are required to hold public hearings. Public Utilities Code § 5890(g) does not specify whether the requirement to "hold public hearings before issuing a decision" applies to matters raised pursuant to a division or particular section(s). This ambiguity, however, is easily resolved when we consider our authority to launch investigations. A public hearing is used as a tool for gathering information in an investigation. If we do not have authority to investigate a matter, it would be unreasonable to find that we are required to hold public hearings on the matter. Thus, we conclude that that Commission is required to hold hearings only in formal proceedings regarding franchising; antidiscrimination and build-out; reporting; the prohibition of financing video deployment with rate increases for stand-alone, residential, primary line, basic telephone services; or user fees.
DIVCA does not define the type of required "public hearing." Public Utilities Code § 5890(g) gives the Commission flexibility to determine which type of public hearing could best develop the record needed for deciding an individual matter. Given current Commission practice, an investigation accordingly may include evidentiary, full panel, and public participation hearings conducted in public.635
B. Enforcement of Statutory Provisions Subject to Commission Regulation
This section describes how the Commission will enforce specific DIVCA provisions subject to Commission regulation. As noted above, DIVCA tasks us with regulating franchising; antidiscrimination and build-out; reporting; the prohibition against financing video deployment with rate increases for stand-alone, residential, primary line, basic telephone services; and user fees.
Pursuant to Public Utilities Code §§ 5840 and 5930, we determine that the Commission has the authority to reject an application or suspend and/or invalidate any state video franchise that was issued to an applicant that was ineligible for the franchise at the time of application. As discussed in Section X, any interested party can bring facts to the Commission that are relevant to our determination of eligibility pursuant to Public Utilities Code §§ 5840 or 5930.
We also find that the Commission has the authority to suspend or revoke a state video franchise if it determines that a fact or condition exists that, if it had existed at the time of the original application for the state video franchise (or transfer or amendment thereof), reasonably would have warranted the Commission's refusal to issue the state video franchise originally (or grant the transfer or amendment thereof). This enforcement authority flows from (i) our general enforcement powers in Public Utilities Code § 5890(g) and (ii) our specific authority to administer the state video franchise application process, pursuant to Public Utilities Code § 5840.636
Pursuant to Public Utilities Code § 5890(g), we may open an investigation to determine whether an applicant failed to comply with DIVCA franchising provisions. An investigation, consistent with standard Commission practices, shall be launched pursuant to formal action of the Commission. The initiation of the investigation shall require a majority vote at a Commission meeting. In particular, an allegation of a material misstatement or omission will likely trigger either (i) an order to show cause for why a franchise should not be suspended, revoked, or declared invalid or (ii) an order initiating a broad investigation into the appropriate Commission response to the alleged facts. The order shall either contain a report or the declarations of Commission witnesses pertaining to facts that demonstrate an investigation of Public Utilities Code § 5840 compliance is warranted. An order also could temporarily restrain a state video franchise holder from offering video service until further Commission action.
Any formal Commission investigation shall include public hearings, with the particular form of public hearing determined by Commission ruling.637 If we initiate a formal investigation, interested parties may make motions to the Commission for permission to participate in the investigation and hearing process. Any such investigation would be conducted following the Commission's procedures for adjudicatory matters.
Many parties ask us to provide more detail on how we plan to enforce antidiscrimination and build-out requirements. Because of the great interest in this topic, we set forth the Commission's specific enforcement strategy related to these franchise obligations, and we tailor our reporting requirements to ensure that we routinely receive key information pertaining to antidiscrimination and build-out requirements. Related reporting requirements are described in detail in Section XIII. The Commission reiterates its resolve to enforce the antidiscrimination and build-out requirements contained in DIVCA.
Many consumer organizations urge us to describe our enforcement mechanisms, especially as they relate to antidiscrimination and build-out requirements. Parties calling for more such discussion include CCTPG/LIF,638 Greenlining,639 DRA,640, CFC,641 and TURN.642
The Commission will undertake significant monitoring for enforcement of the antidiscrimination and build-out requirements. Although the Commission will provide public reports regarding video and broadband services "on an aggregated basis,"643 each state video franchise holder will report to the Commission the data underlying the public reports at a high level of disaggregation. On a confidential basis, the Commission's staff will study this disaggregated data closely, in order to determine and track the progress that each state video franchise holder is making towards fulfilling its build-out requirements. This detailed review will have direct bearing on any request for an extension of time for meeting the build-out requirements. Public Utilities Code § 5890(f)(4) dictates that we may grant an extension only if a state video franchise holder has "made substantial and continuous effort" toward meeting build-out requirements.
Formal investigation of antidiscrimination and build-out compliance may be launched in two ways: (i) in response to a complaint filed by a local government, or (ii) on the Commission's own motion. Under the first scenario, a local government may bring a complaint concerning a state video franchise holder's failure to meet the requirements of Public Utilities Code § 5890 by filing a standard complaint at the Commission. The complaint shall include sworn declarations pertaining to the facts that the local government believes demonstrate a failure to fulfill obligations imposed by Public Utilities Code § 5890. In addition, the local entity filing a complaint shall clearly identify that the complaint pertains to a failure to meet an obligation imposed by Public Utilities Code § 5890.
Under the second scenario, an investigation will be launched pursuant to formal action of the Commission. At a Commission meeting, we shall consider and formally vote upon an order to show cause or an order instituting an investigation. Consistent with current practice, the document initiating the investigation will contain a report prepared by Commission staff and/or declarations of Commission witnesses pertaining to facts that demonstrate an investigation of Public Utilities Code § 5890 compliance is warranted.
If the Commission initiates an investigation involving alleged failure to meet build-out requirements, interested parties may make motions to the Commission for permission to participate in the investigation and hearing process. DIVCA requires the Commission to hold public hearings in conjunction with an antidiscrimination or build-out investigation, and the Commission will determine through rulings which form or forms of hearings to use.644
Multiple penalties may be imposed if the Commission finds that a state video franchise holder is not complying with Public Utilities Code § 5890. First, the Commission can impose fines. Specifically, "in addition to any other remedies provided by law," the Commission may "impose a fine not to exceed 1 percent of the holder's total monthly gross revenue received from provision of video service in the state each month from the date of the decision until the date that compliance is achieved."645 Second, the Commission may suspend a state video franchise holder's state franchise. 646 Finally, in more serious cases, the Commission may revoke a state video franchise holder's state franchise.647
We find that is unlawful for any applicant or state video franchise holder willfully to make any untrue statement of a material fact in any application, notice, or report filed with the Commission under DIVCA. Similarly, it is unlawful for any applicant or state video franchise holder willfully to omit to state in any such application, notice, or report any material fact which is required to be stated by DIVCA.
Formal investigation of compliance with DIVCA reporting requirements may be launched on the Commission's own motion.648 An investigation also may be initiated in response to a complaint filed by a local government if the reporting requirement at issue is used to monitor compliance with Public Utilities Code § 5890.649 Procedures regarding investigations parallel those outlined in the prior section. Enforcement actions, if any, will be consistent with the facts of the case and the authority granted to the Commission under DIVCA.
If the Commission initiates a formal investigation, interested parties may make motions to the Commission for permission to participate in the investigation and hearing process. DIVCA requires the Commission to hold public hearings in conjunction with a formal complaint or an investigation.650
With regard to penalties, Section VII.G of the draft General Order (Enforcement of Reporting Requirements) provided notice that failure to comply with reporting requirements could lead to suspension or revocation of a state video franchise. No party filed comments pertaining to this section of the General Order. Lacking any objection or comments, we conclude that our statement of how we will act to enforce reporting requirements generated little controversy, and the sanctions of franchise suspension and revocation are consistent with our statutory authority.651
We also conclude that we may levy fines in two instances. First, we may fine a company if it fails to provide financial reports required by Public Utilities Code § 443. Pursuant to Public Utilities Code § 444(a), we may assess "a penalty not to exceed 25 percent of the amount [a state video franchise holder's estimated user fee], on account of the failure, refusal, or neglect to prepare and submit the report" required by Public Utilities Code § 443. Second, we may fine a state video franchise holder if it fails to provide accurate reports needed to enforce antidiscrimination and build-out provisions. In particular, a key function of the annual broadband and video reporting requirements (§ 5960) is to enable the Commission to enforce Public Utilities Code § 5890. Thus, our authority to impose penalties pursuant to Public Utilities Code § 5890(g) flows to instances where a state video franchise holder misstates or omits information required by Public Utilities Code § 5960.
4. Prohibition Against Financing Video Deployment with Increases to Rates of Stand-Alone, Residential, Primary Line, Basic Telephone Service
Two DIVCA provisions prohibit use of rate increases for stand-alone, residential, primary line, basic telephone services to finance video deployment. First, Public Utilities Code § 5940 states that the "holder of a state franchise . . . who also provides stand-alone, residential, primary line, basic telephone service shall not increase this rate to finance the cost of deploying a network to provide video service." Second, Public Utilities Code § 5950 prohibits incumbent local exchange carriers that obtain a state video franchise from changing any rate for basic telephone service until January 1, 2009, unless the incumbent is subject to rate-of-return regulation.
DRA criticizes the draft General Order for not including language that directly addresses the cross-subsidization provisions.652 To overcome this perceived deficiency, DRA urges the Commission to add the following new section to the General Order:
Holders of a state video franchise who provide stand-alone, residential, primary line, basic telephone service must report to the Commission and the Division of Ratepayer Advocates on a quarterly basis commencing on April 1, 2008 with annual information as of January 1, 2008 and each year thereafter: (1) increases in the rate for stand-alone, residential, primary line, basic telephone service by wire center or such other geographical division as is employed by the service provider when pricing this service; (2) financial and engineering information showing the cost of deploying its network to provide (a) basic residential primary line telephone service, and (b) video service in those wire centers or geographical divisions where there have been increases in the rate for stand-alone, residential, primary line, basic telephone service.
The Commission and the Division of Ratepayer Advocates retain full authority provided in Public Utilities Code to audit state franchise holders who are also providers of stand-alone, residential, primary line, basic telephone service to enforce the Public Utilities Code § 5940 prohibition against cross-subsidy.653
DRA contends that this additional language appropriately accounts for how DIVCA "adds to" our obligations to ensure that "telephone utilities do not cross-subsidize the operations of their non-regulated services with revenues from the regulated utility."654
TURN similarly disapproves of our failure to provide "any procedures to ensure that Public Utilities Code Section 5940's prohibition on cross-subsidization is enforced."655 TURN provides an elaborate analysis and alleges that "the ILECs are `laying fiber away' on their regulated books of account, to be recovered from future basic service rate increases."656 Given its concerns, TURN argues that the Commission must establish additional reporting requirements: "[F]rom a reporting perspective, there must be procedures established in California that further develop ARMIS-based data, and result in a consistent set of procedures that allow the tracking of video-related investment."657
AT&T responds to both of TURN's arguments. First, AT&T takes issue with TURN's allegation that ILECs are "laying fiber away" on their regulated books of account:
AT&T California states that AT&T's ARMIS data submitted to the FCC in accordance with federal cost allocation rules under Code of Federal Regulations Part 64 are consistent with all federal requirements. Any suggestions by TURN that AT&T California sends a mixed signal in its filings are unfounded and without merit. All data submitted under Part 64 are subject to independent biennial audit requirements. AT&T California complies with all applicable requirements.658
Second, AT&T declares that holding up the granting of a state video franchise "while numerous parties debate detailed accounting issues would violate the spirit and letter of AB 2987."659 AT&T notes that DIVCA freezes basic residential telephone rates until January 1, 2009, so in any event, there is no current need for reports to look into whether companies are increasing rates of stand-alone, residential, primary line, basic telephone services to finance video deployment.660
SureWest agrees that the "Commission should not adopt revisions proposing comprehensive regulations related to cross-subsidization."661 SureWest contends that these comprehensive regulations are not needed, due to the freeze on basic rates adopted DIVCA.662 SureWest adds that nothing in DIVCA authorizes the expansive reporting requirements requested by TURN and DRA.663
Verizon contends that "expanded ILEC-only cross-subsidy monitoring is unnecessary and inconsistent with the Act."664 It argues that "TURN's cross-subsidy analysis is a classic example of the kind of anticipatory regulation that the Commission should avoid."665 Verizon presents a multi-part rebuttal of TURN's arguments. Among other points, Verizon asserts that "TURN's own data clearly show that video costs are being properly allocated to non-regulated accounts, not vice versa, as TURN contends."666 Verizon also asserts that TURN's analysis ignores D.06-08-030, which found that local telecommunications markets are competitive. Verizon states that this decision establishes that "[b]asic residential price increases . . . cannot be assumed to `automatically' violate Section 5940 since they are constrained by competition, not driven by the need `to finance' the cost of deploying a video network."667
California telecommunications companies already are subject a variety of measures designed to prevent unlawful cross-subsidization between telecommunications costs and non-telecommunications costs. These measures, imposed by both the federal and state government, obviate the need for additional rules to prevent financing of video deployment with rate increases for stand-alone, residential, primary line, basic telephone services.
With respect to the federal government, the FCC's Part 64 regulations require the accounting separation of telecommunications costs from the non-telecommunications costs for telecommunications utilities, such as Verizon, AT&T, and SureWest.668 These communications accounts also are subject to independent biennial audits. Verizon's data suggests that there is no merit in TURN's attempt to cast doubt regarding the maintenance of these accounts.
With respect to the state government, this Commission has a variety of protections in place to ensure that there is no illegal cross-subsidization. Cross-subsidization has long been a concern of this Commission. Public Utilities Code § 709.2, which authorized the Commission to open intrastate interexchange telecommunications services to competition, requires the Commission to determine "that there is no improper cross-subsidization of intrastate interexchange telecommunications service by requiring separate accounting records to allocate costs for the provision of intrastate interexchange telecommunications service and examining the methodology of allocating those costs."
We remain vigilant in our efforts to enforce Public Utilities Code § 709.2. For example, the Commission spent four years reviewing affiliate transactions for the period of 1997 to 1999. Our subsequent decision found that although there were some "problems with the internal controls . . . , regulated operations are adequately compensated and do not subsidize unregulated aspects of the business."669
Public Utilities Code § 495.7 further requires tariffing of basic residential rates. Tariffing entails special Commission reviews, which give us the opportunity to reject or suspend any price increases that lead to unlawful cross-subsidization.670 A telecommunications carrier must file an advice letter with the Commission before it increases its basic residential rates, and the carrier must give consumers thirty-day advance notice of this change. The Commission need only reject the advice letter if it determines a proposed rate increase will result in unlawful cross-subsidization. Alternatively, if need be, the Commission may rescind any non-complying tariff that goes into effect.
In the video context, Public Utilities Code § 5950 imposes special price controls that are designed to prevent illegal cross-subsidization. The statute prohibits incumbent local exchange carriers that obtain a state video franchise from changing any rate for basic telephone service until January 1, 2009, unless the incumbent is subject to rate-of-return regulation.671 This provision ensures that there is no opportunity for basic residential rates to be increased to support video service operations for approximately the next two years.
Furthermore, even after January 1, 2009, stand-alone, residential, primary line, basic telephone service remains subject to tariff restrictions. It will be relatively easy to review any changes to rates of stand-alone, residential, primary line basic telephone service, either prospectively or retrospectively, to ensure that the increase is not used to finance video deployment.
A formal investigation into alleged illegal cross-subsidization may be initiated by the Commission at any time.672 Due to Public Utilities Code § 1702, as implemented by Rule 4.1 of the Commission's Rules of Practice and Procedure, local governments or individual consumers, among others, also may bring cross-subsidization complaints to the Commission.673
Any filing of a cross-subsidization complaint relying upon, at least in part, Public Utilities Code §§ 5940 or 5950 will trigger the requirement of a public hearing.674 Once again, interested parties may make motions to us to participate in the investigation and hearing process associated with any complaint or investigation initiated by the Commission.
With respect to penalties for noncompliance, we find that a violation of the prohibition against financing video deployment with rate increases for stand-alone, residential, primary line, basic telephone services could subject a communications company to a wide range of sanctions. Sanctions for a telecommunications affiliate may include monetary sanctions pursuant to Public Utilities Code § 798675 and possible reparations to harmed consumers pursuant to the broad authority afforded to us by Public Utilities Code § 451.676 Sanctions for a video affiliate may include suspension or revocation of its state video franchise.677
Enforcement actions pursuant to Public Utilities Code § 444 are straightforward and uncontroversial. No party commented on this topic.
Public Utilities Code § 444 provides the Commission with specific enforcement authority to (i) impose penalties for the late submission of user fees, (ii) revoke or suspend a franchise when the state video franchise holder is in default for payment of the user fee for 30 days or more, and (iii) pursue collection of user fees in courts of competent jurisdiction. Before any such enforcement action is taken, the Commission will initiate an investigation and hold public participation hearings on alleged noncompliance.678 Procedures for a Commission investigation here follow those used in enforcing other DIVCA provisions regulated by the Commission.
C. Enforcement of Consumer Protection Requirements
Section 5900(c) of DIVCA provides that the "local entity shall enforce all of the customer service and protection standards of this section with respect to complaints received from residents within the local entity's jurisdiction . . . ."679 With this legislative directive in mind, the OIR envisioned a minimal role for the Commission in consumer protection.
Some parties raise concerns related to consumer protection in their comments. On the one hand, CCTPG/LIF, and CFC comment in such a manner that clearly envisions a process whereby the Commission enforces and perhaps develops consumer protection rules.680 On the other hand, the opposition of AT&T,681 CCTA,682 SureWest,683 Small LECs,684 and Verizon685 to protests clearly envisions a limited role for the Commission in enforcing consumer protection laws. A more detailed description of these comments is available in Section IX.
Also several parties ask the Commission to develop its own consumer protection regulations. "Greenlining proposes that a detailing of initial consumer protections should be requested of consumers and the cable companies in a separate hearing that is part of this OIR and will lead to final consumer protection rules by the end of 2007."686 Likewise, TURN laments the "lack of specific provisions in the OIR and G.O. for enforcing . . . consumer protection requirements" of DIVCA.687
We have carefully reviewed the record in this proceeding and the specific language of Public Utilities Code § 5900(c). Based on the plain language of the statute, we find that the local entity is empowered with the primary enforcement of consumer protection laws and is the place where the Legislature intended video consumers should bring complaints concerning customer service.
DIVCA is explicit about how local entities should enforce the consumer protection provisions. DIVCA orders local entities to adopt a schedule of penalties for any material breach of the consumer protection provisions.688 For any alleged material breach of consumer protection standards, a local entity must provide the state video franchise holder written notice of the alleged breach and give the holder at least thirty days to remedy the specified material breach.689 DIVCA also sets forth the method for compounding penalties690 and prescribes the distribution of penalty proceeds between the local entity and the Digital Divide Account.691 Any interested person may seek judicial review of a local entity's decision in a court of appropriate jurisdiction.692
As compared to a local entity, the Commission's role in enforcement of consumer protection provisions is considerably more limited. DIVCA neither provides for us to initiate investigations against a state video franchise holder, nor does DIVCA ask us to determine whether material breaches of the consumer protection standards have occurred. We find that we have no statutory authority to adjudicate parties' complaints concerning alleged violations of consumer protection provisions.
The Commission's authority to respond to a violation of a consumer protection provision is limited to suspension or revocation of a state video franchise. 693 Given that the Commission has no independent regulatory authority over consumer protection, we find that it is appropriate for us to exercise this authority to revoke or suspend a state video franchise only in response to pattern and practice of material breaches that are established by local entities or the courts.
The Commission may initiate a legal proceeding to examine the extent of a state video franchise holder's pattern and practice of consumer protection breaches, as found by local entities or courts. In conducting this legal proceeding, the Commission shall not consider the merits of alleged material breaches de novo. Instead, the Commission only will consider whether enforcement actions and penalties assessed by a local entity were either uncontested or sustained by courts and whether these enforcement actions and penalties rise to a level such that state video franchise suspension or revocation is warranted. We will rely upon these considerations when determining whether a state video franchise holder's actions warrant suspension or revocation of the state video franchise.
D. Procedures for Conducting Investigations or Hearing Complaints
When we address complaints by local entities and conduct investigations, the OIR tentatively concluded that we will follow our current Rules of Practice and Procedure to the extent that doing so is consistent with the authority granted to this Commission by the Legislature. We also tentatively concluded that the Commission will decide matters brought before it by making findings that are "supported by substantial evidence in light of the whole record."694
League of Cities/SCAN NATOA argues that the Commission should adopt "clear and concise rules and procedures that would permit the League/SCAN NATOA members as well as their cable and video service customers to timely and appropriately contribute in all phases of the state-issued franchise process . . . ."695 In particular, League of Cities/SCAN NATOA states that "[t]he Commission's Rules of Practice and Procedure must be amended to accommodate complaints to be filed by local government."696 League of Cities/SCAN NATOA voices concerns "that such procedures would be made binding upon local governments without any modifications of the current complaint procedure set forth in Article 4, Chapter 1, Title 20 of the California Code of Regulations . . . ."697 League of Cities/SCAN NATOA points out that "Rule 4.1 does not now address complaints against video service providers in connection with their provision of video services."698
Similarly, Greenlining argues that the Commission must "amend its rules of practice and procedure to allow complaints to be filed by local governments."699 Greenlining considers its and other consumer organizations' participation to be an important consumer protection in Commission proceedings.700
In conducting investigations and hearing complaints filed by local entities, the Commission needs rules of practice and procedure to guide the conduct of its hearings and ensure that it does not act in an arbitrary way. Accordingly, the OIR proposed to follow the existing Rules of Practice and Procedure to the extent that doing so is consistent with the authority granted to this Commission by the Legislature.
As League of Cities/SCAN NATOA demonstrates, sections of the Commission's Rules of Practice and Procedure do not apply. In particular, Rule 4.1 restrictions that limit filing of complaints to actions done or omitted by utilities is not relevant and inconsistent with DIVCA. DIVCA expressly provides that "[l]ocal governments may bring complaints to the state franchising authority that a holder is not offering video service as required by this section [5890]."701 We, therefore, conclude that sections of the Rules pertaining to who can complain and what they can complain about cannot apply to proceedings regarding DIVCA.
This conclusion raises an important question: How can local entities and other parties participating in a complaint or investigation know which sections of the Rules of Practice and Procedure remain applicable in a specific situation? Since parties to this proceeding have not addressed this matter in detail, we will address these issues in Phase II of this proceeding. We will invite parties to this proceeding to propose deletions or modifications to any rules in the Commission's Rules of Practice and Procedure that the parties believe are inconsistent with DIVCA.
Finally, we agree with Greenlining's comment that participation of consumer groups such as itself plays a valuable role in Commission proceedings. Once a local government or the Commission initiates a proceeding, interested parties then may contribute the proceeding.
E. The Role of DRA
Pursuant to Public Utilities Code § 5900(k), the "Division of Ratepayer Advocates shall have authority to advocate on behalf of video customers regarding renewal of a state-issued franchise and enforcement of Sections 5890, 5900, and 5950. For this purpose, the division shall have access to any information in the possession of the commission subject to all restrictions on disclosure of that information that are applicable to the commission." The OIR did not expound further on the role of DRA.
Many parties filed comments concerning the appropriate role for DRA as the Commission assumes its new role as sole state franchising authority. The comments indicate that DRA and parties require guidance on the role that DRA will play. Thus, this section clarifies the role of DRA in the administration of DIVCA.
DRA asks us to revise the General Order to "to clarify [its] responsibilities and to explicitly include DRA in various notification, service, and data production requirements."702 In its attachment to its opening pleading, DRA amends the General Order to (i) name itself as a mandated recipient of all reports and notices;703 (ii) require the Commission to provide notice to DRA on the completeness of a franchise application;704 (iii) enable itself to file protests to franchise applications and require other protestants to service notices on DRA;705 and (iv) empower itself to file complaints against franchise holders at any time.706
Local entities call for clarification regarding DRA's role. Los Angeles County laments that neither the OIR nor the draft General Order refer to DRA or its role in Commission proceedings.707 Likewise, Oakland notes the advocacy role assigned to DRA, and also argues that "[t]he GO also does not explain how DRA will make that advocacy manifest."708
Pursuant to statutory language, TURN,709 CCTPG/LIF,710 AT&T,711 and SureWest,712 support DRA's special role in enforcing DIVCA. CCTPG/LIF also supports an enforcement role for DRA under the statute.
Despite SureWest's support for DRA's role, SureWest argues that DRA only has a "limited role" in enforcing DIVCA:
DRA is only authorized to advocate on behalf of video customers with respect to franchise renewals, compliance with build-out requirements, compliance with customer service and privacy requirements, and the rate freeze imposed on telephone companies. Section 5900(k) does not give DRA the authority to participate in the initial application process. The Legislative Counsel Digest confirms DRA's limited role in the video franchise process . . . .
AT&T similarly notes that DIVCA "specifically outlines" DRA's role.713
DIVCA limits DRA's role to advocacy and enforcement actions related to Public Utilities Code §§ 5890, 5900, and 5950.714 Section 5890 contains the non-discrimination and build-out requirements. Section 5900 pertains to the enforcement of customer service and consumer protection standards. Section 5950 includes the statutory prohibition on increasing basic residential telecommunications rates until after January 1, 2009.
DIVCA further provides that DRA may have access to information in the Commission's possession "for this purpose" of enforcing the Code sections listed above.715 Since DIVCA limits the advocacy role of DRA to Public Utilities Code §§ 5890, 5900, and 5950, we decline to amend the General Order as DRA has requested. We see no public purpose in routinely requiring applicants, state video franchise holders, and the Commission to serve all application materials, reports, and notices on DRA. Routine distribution of information is at odds with DIVCA. DIVCA created a narrowly tailored role for DRA, and we have no statutory authority to expand DRA's role in the application context.716
Upon further review, however, we elect to revise our previously proposed procedures regarding DRA's ability to access video information. We make these revisions out of an abundance of caution. We do not intend for our procedures regarding DRA's access information to be unduly burdensome. Accordingly, we shall provide DRA with unfettered access to any video information possessed by the Commission. Upon review of this information, DRA may copy only that information required for it to fulfill its obligations pursuant to DIVCA, i.e., obligations pertaining to state video franchise renewals and enforcement of Public Utilities Code §§ 5890, 5900, and 5950.
We also remind DRA that any information it accesses may be subject to our restrictions on disclosure. In particular, we note that information provided under Public Utilities Code § 5960 is subject to the protections of Public Utilities Code § 583, which states that "no information . . . shall be . . . made public except on order of the commission, or by the commission or a commissioner in the course of a hearing or proceeding." Pursuant to Section 583, the Commission, not DRA, determines which information shall be made public.
With respect to protests on state video franchise applications, we reiterate our decision in Section IX that we will not allow protests on applications. Protests are inconsistent with DIVCA provisions on state video franchise applications. We, therefore, will not accept a protest from DRA on a matter pertaining to a state video franchise application.
Regarding complaints, DIVCA expressly gives local government entities, not DRA, the right to file complaints concerning the performance of a company pursuant to Public Utilities Code § 5890. We find that there is no statutory basis for similarly permitting DRA to file complaints. We, therefore, will not allow DRA to file complaints concerning the actions of state video franchise holders.717 Granting DRA additional authority to file complaints before us is neither consistent with DIVCA nor needed for DRA to fulfill the role assigned to it.
DRA possesses alternate, ample avenues under DIVCA whereby DRA can fulfill its statutory obligations. First, DRA can always write a letter bringing a matter to the attention of the Commission, which then will be able to determine the appropriate steps to take. If the Commission opens an investigative proceeding, DRA would be able to participate fully in the proceeding. Second, DRA can partner with a local entity to bring a joint complaint before this Commission. Third, DRA can participate fully in any enforcement action or investigation independently initiated by the Commission.
We further note that DRA can protect consumers by bringing consumer protection matters before local entities or courts of competent jurisdiction, as DRA deems appropriate.718 In particular, we find that DRA's role in advocating on behalf of consumers on issues relating to Public Utilities Code § 5900 is a matter that DRA will need to resolve with local government entities and the courts. Consumer service and protection standards are entrusted to local government entities for enforcement, including the development of schedules for fines. Since DRA's role in addressing these issues is not a matter that affects the role of this Commission in implementing DIVCA, we decline to set a particular role for DRA.
617 Commission authority to impose user fees is established in Public Utilities Code §§ 440-444, which are not part of Division 2.5.
618 Cal. Pub. Util. Code § 5890(g).
619 AT&T Opening Comments at 10.
620 Id. at 10-11.
621 CCTA Opening Comments at 9.
622 Id.
623 DRA Reply Comments at 6 (criticizing AT&T).
624 Id.
625 TURN Reply Comments at 9.
626 Id.
627 Id. (quoting Public Utilities Code § 5810(a)(2)(G)).
628 CCTPG/LIF Reply Comments at 2.
629 Id.
630 Id.; DRA Reply Comments at 6; TURN Reply Comments at 9.
631 Cal. Pub. Util. Code § 5890(g).
632 Id.
633 Pursuant to our statutory authority under Division 2.5, the Commission will initiate investigations as to the following: Public Utilities Code §§ 5840, 5890, 5920, 5940, 5950, and 5960.
634 Court resolution is explicitly envisioned by Public Utilities Code §§ 444(d), 5850(d), 5860(i), 5870(p), 5890(i), and 5900(h).
635 The Commission currently holds four different types of public hearings: evidentiary hearings, quasi-legislative hearings, full panel hearings before the Commission, and public participation hearings. We, however, know of no situation where a complaint proceeding included quasi-legislative hearings, so we have removed this type of hearing from the available options.
636 See Cal. Pub. Util. Code § 5840 (granting us authority to review a state video franchise application and determine whether it is complete).
637 Id. at § 5890(g).
638 CCTPG/LIF Opening Comments at 3.
639 Greenlining Opening Comments at 3.
640 DRA Opening Comments at 15.
641 CFC Opening Comments at 4.
642 TURN Reply Comments at 5.
643 Cal. Pub. Util. Code § 5890(c).
644 Id. at § 5890(g) (declaring that the "state franchising authority shall hold public hearings before issuing a decision").
645 Id. at § 5890(h).
646 Public Utilities Code § 5890(g) states that "[t]he commission may suspend or revoke the franchise if the holder fails to comply with the provisions of this division."
647 Cal. Pub. Util. Code § 5890(g).
648 Id.
649 Id.
650 Public Utilities Code § 5890(g) states that the "state franchising authority shall hold public hearings before issuing a decision."
651 Public Utilities Code § 5890(g) states that "[t]he commission may suspend or revoke the franchise if the holder fails to comply with the provisions of this division."
652 DRA Opening Comments at 3.
653 DRA Opening Comments, Attachment B, at 34.
654 Id. at 3.
655 TURN Opening Comments at 2.
656 Id.
657 Id. at 14.
658 Id. at 17 (citations omitted).
659 AT&T Reply Comments at 16.
660 Id.
661 SureWest Reply Comments at 8.
662 Id. at 8-10.
663 Id.
664 Verizon Reply Comments at 19.
665 Id. at 20.
666 Id.
667 Id. at 21.
668 47 C.F.R. 64.901.
669 D.04-09-061 at 63.
670 We note that D.06-08-030 and DIVCA have frozen basic residential rates until January 1, 2009. In addition, D.06-12-044 makes it clear that all advice letter filings for tariff changes remain subject to protest and possible rescission.
671 Cal. Pub. Util. Code § 5950.
672 Id. at § 5890(g); id. at § 798.
673 Rule 4.1 of the Commission's Rules of Practice and Procedure ("A complaint may be filed by any corporation or person, chamber of commerce, board of trade, labor organization, or any civic, commercial, mercantile, traffic, agricultural or manufacturing association or organization, or any body politic or municipal corporation, setting forth any act or thing done or omitted to be done by any public utility including any rule or charge heretofore established or fixed by or for any public utility, in violation, or claimed to be in violation, of any provision of law or of any order or rule of the Commission.").
674 See Cal. Pub. Util. Code § 5890(g) ("The state franchising authority shall hold public hearings before issuing a decision.").
675 Id. at § 798 ("Whenever the commission finds and determines that any . . . telephone corporation has willfully made an imprudent payment to, or received a less than reasonable payment from, any subsidiary or affiliate of, or corporation holding a controlling interest in, the . . . telephone corporation in violation of any rule or order of the commission, adopted and published by the commission prior to the transaction but after notice to, and an opportunity to comment by, the affected corporation, and the corporation has sought to recover the payment in any proceeding before the commission, the commission may, following a hearing, levy a penalty against the corporation not to exceed three times the required or prohibited payment, as the case may be, if the commission finds that the payment, in whole or part, was made or received by the corporation for the purpose of benefiting its subsidiary, affiliate, or holding corporation.").
676 See, e.g., D.04-09-062 (ordering Cingular to pay fines and make reparations in the amount of more than $12 million).
677 Cal. Pub. Util. Code § 5890(g).
678 Id.
679 Id. at § 5900(c).
680 CCTPG/LIF cites Public Utilities Code § 5840(i)(3) as implying Commission authority to enforce consumer protection rules. CCTPG/LIF Opening Comments at 7. CFC concludes that the Commission has a role in consumer protection. CFC Opening Comments at 8. Neither of these parties, however, calls for the development of specific consumer protection rules.
681 AT&T Reply Comments at 2.
682 CCTA Reply Comments at 8-10.
683 SureWest Reply Comments at 5-7.
684 Small LECs Opening Comments at 2.
685 Verizon Opening Comments at 7.
686 Greenlining Opening Comments at 11.
687 TURN Reply Comments at 6.
688 Cal. Pub. Util. Code § 5900(d).
689 Id. at § 5900(e).
690 Id. at § 5900(f).
691 Id. at § 5900(g). CCTPG/LIF similarly requests that fines "assessed on state franchise holders for not complying" with Public Utilities Code § 5890 "should go into the Digital Divide Account, established pursuant to Cal. Public Util. Code Sec. 280.5." CCTPG/LIF Opening Comments at 9. We, however, find no statutory basis for this request. The Digital Divide Account was established only for receipt of penalties collected pursuant to Public Utilities Code § 5900.
692 Cal. Pub. Util. Code § 5900(h).
693 Id. at § 5890(g) (giving the Commission the authority to "suspend or revoke the franchise if the holder fails to comply with the provisions of this division").
694 Cal. Civ. Proc. Code § 1094.5. In cases other than those "in which the court is authorized by law to exercise its independent judgment on the evidence, . . . abuse of discretion is established if the court determines that the findings are not supported by substantial evidence in the light of the whole record." Id. at § 1094.5(b). AB 2987 does not authorize an independent review of the evidence, so this formulation of the abuse of discretion standard governs our review issues arising under the statute.
695 League of Cities/SCAN NATOA Reply Comments at 13.
696 League of Cities/SCAN NATOA Opening Comments at 16.
697 Id. at 17.
698 Id. at 17.
699 Greenlining Reply Comments at 11.
700 Greenlining Opening Comments at 9.
701 Cal. Pub. Util. Code § 5890(g).
702 DRA Opening Comments at 2-3.
703 Id., Attachment B, at 12, 19-20, 22-25, 27-28, 31-35.
704 Id. at 13.
705 Id. at 14-15.
706 Id. at 18.
707 Los Angeles County Opening Comments at 2.
708 Oakland Opening Comments at 4.
709 TURN Opening Comments at 4.
710 CCTPG/LIF Opening Comments at 6, n.2.
711 AT&T Reply Comments at 9.
712 SureWest Opening Comments at 19.
713 AT&T Reply Comments at 9.
714 Cal. Pub. Util. Code § 5900(k). DRA has no statutory authority to advocate or initiate enforcement actions pursuant to Public Utilities Code § 5840, the section pertaining to applications. We also find that we have no statutory obligation to provide DRA with special notification concerning our action on a state video franchise application. As a courtesy, however, we will provide DRA an e-mail notice at the time of our action on an application. The Commission's action on a state video franchise application is a matter of public record and will be announced on the Commission's website.
715 Id. at § 5900(k).
716 Public Utilities Code § 5840(b) states that the "authority granted to the Commission under this section shall not exceed the provisions set forth in this section." This section, pertaining to the franchise application, does not give the Commission the ability to assign a related role to DRA.
717 But once the Commission opens an investigation on the action of a particular state video franchise holder, then DRA, as well as other parties, is welcome to participate.
718 We note that authority over consumer protection issues is not assigned to the Commission, and we lack the statutory authority to investigate consumer protection issues. As a result, filing a complaint before this Commission on a consumer protection matter would serve no purpose.
