5. Discussion of Substantive Issues
5.1. California Policy Encourages Widespread Deployment of Advanced Telecommunications Services
The policy of the State of California is to encourage widespread deployment of advanced telecommunications services, such as high-speed internet access. One of the Commission's specific goals is to remove any governmental barriers to such deployment.
The Legislature has adopted these telecommunication principles for California:
(a) To continue our universal service commitment by assuring the continued affordability and widespread availability of high-quality telecommunications services to all Californians;
(b) To focus efforts on providing educational institutions, health care institutions, community-based organizations, and governmental institutions with access to advanced telecommunications services in recognition of their economic and societal impact;
(c) To encourage the development and deployment of new technologies and the equitable provision of services in a way that efficiently meets consumer need and encourages the ubiquitous availability of a wide choice of state-of-the-art services;
(d) To assist in bridging the "digital divide" by encouraging expanded access to state-of-the-art technologies for rural, inner-city, low-income, and disabled Californians;
(e) To promote economic growth, job creation, and the substantial social benefits that will result from the rapid implementation of advanced information and communications technologies by adequate long-term investment in the necessary infrastructure;
(f) To promote lower prices, broader consumer choice, and avoidance of anticompetitive conduct;
(g) To remove the barriers to open and competitive markets and promote fair product and price competition in a way that encourages greater efficiency, lower prices, and more consumer choice; and
(h) To encourage fair treatment of consumers through provision of sufficient information for making informed choices, establishment of reasonable service quality standards, and establishment of processes for equitable resolution of billing and service problems.6
Consistent with these directives, the Commission has adopted a ratepayer-funded program to bring advanced services to unserved and underserved areas in the state. See D.07-12-054, Order Instituting Rulemaking into the Review of the California High Cost Fund B Program, Interim Opinion Implementing California Advanced Services Fund. As explained by the Commission in creating the ratepayer-funded program:
[P]romoting deployment of additional broadband within areas that are not served at all or underserved is consistent with universal service policies aimed at bridging the "digital divide" as articulated in Pub. Util. Code §§ 709(c) and (d). While we believe that solutions to the digital divide are best driven by market forces within the telecommunications and internet industry, the public sector has a role to play as well, particularly where in some places in California, the market has failed to bring advanced communications to it. The first and most important public role is to identify and remove unnecessary regulations or barriers in the way of broadband deployment and adoption. (See D.07-12-054, at p. 7 (emphasis added)).
Making basic telephone service universally available in California has been a longstanding policy goal of this Commission and the Legislature. The Commission administers extensive and expensive programs to ensure availability to low-income and rural customers. Nationally, Congress and the Federal Communication Commission also have longstanding similar programs.
With advanced telecommunications services, along with our Federal colleagues, we have recognized the importance and added urgency of strengthening the existing system to serve all interested customers, as well as expanding it into heretofore unserved areas. One critical role we have assumed is to identify and overcome unnecessary governmental or regulatory barriers to achieving these goals.
Extending and enhancing telecommunications facilities will require placement of these facilities in public right of ways as well as, in some instances, on private property. We are committed to minimizing the impact on private property owners and we support prompt compensation via the state court system for unavoidable impacts. These projects, however, are necessary to achieving our important goal of providing communications services to Californians and should not be subject to unwarranted delay.
In today's decision, we will be mindful of the Legislature's policies and our own previous commitment to encouraging widespread deployment of advanced telecommunications services.
5.2. The Proposed Condemnation is Subject to the Public Interest Test in § 625
The Commission is charged under § 625(a)(1)(A) with determining if a utility may condemn property for the purpose of competing with another entity:
For the purpose of this article, except as specified in paragraph (4), a public utility that offers competitive services may not condemn any property for the purpose of competing with another entity in the offering of those competitive services, unless the commission finds that such an action would serve the public interest.
The threshold issue in this proceeding is to determine whether this statute applies to the proposed condemnation, which we will address through Verizon's motion for summary judgment and Opposing Defendants' response. The entire text of § 625 is reproduced in Attachment C.
In its motion for summary judgment, Verizon argues that § 625 does not apply to this situation because (1) it has no competitors for local landline telephone service in the Summit Road area, and (2) the IOF project will not allow Verizon to enter a new market as a competitor providing high-speed internet access but will only add redundancy and reliability to service Verizon already provides.
Verizon encouraged us to clarify the Superior Court's interpretation of § 625 and rule that the statute does not apply when a carrier is constructing a project within its Commission-approved service territory to enhance service reliability to its existing customers. In its post-trial brief, Verizon explained that in the Uniform Regulatory Framework proceeding (Rulemaking 05-04-005), the Commission concluded that Verizon, and all the large incumbent local exchange carriers, were subject to sufficient competition to lift virtually all price regulations.7 Verizon argues that this conclusion does not necessarily mean all projects undertaken by Verizon are competitive in nature; such an interpretation, in conjunction with § 625, would require Commission involvement in "all telecommunications plant upgrades statewide, regardless of purpose."8 To forestall this interpretation, Verizon recommended that the Commission grant its motion for summary judgment and find that § 625 does not apply to this project.
The Opposing Defendants contended that the Superior Court determined that § 625 applied to the proposed condemnation and that the principles of collateral estoppel, res judicata, and waiver nullify Verizon's arguments.
By its terms, § 625 applies whenever a "public utility" offers a "competitive service." There is no dispute that Verizon is a public utility.
As noted by Verizon, the Commission has previously determined that Verizon is subject to competition in its provision of voice services. However, D.06-08-030 does not address § 625 or otherwise discuss expansion of the Commission's eminent domain jurisdiction.
We need not and do not reach a final determination of the interrelationship of these two decisions. The Superior Court has determined that § 625 "places the issue of whether Verizon's project would serve the public interest within the special competence of the PUC." Verizon is constructing the IOF project to offer local telephone service and high speed internet access, for which there is intermodal competition.9 We, therefore, conclude that for purposes of today's decision, we should exercise jurisdiction and determine whether Verizon's proposed condemnation of a nonexclusive underground utility easement, and related temporary construction easement, serves the public interest as set forth in § 625.
We next analyze the four statutory standards in relation to the evidence presented.10 We analyze the standards in the following order:
· Whether the property to be condemned is necessary for the proposed project;
· Whether the public benefit of acquiring the property by eminent domain outweighs the hardship to the owners of the property;
· Whether the proposed project is located in a manner most compatible with the greatest public good and least private injury; and
· Whether the public interest and necessity require the proposed project.
5.3. The Property to be Condemned is Necessary for the Proposed Project
Verizon's witnesses explained that the approximately five-mile private portion of Summit Road is the only feasible means to connect the ends of its IOF project. As discussed above, Verizon has extended the cable along Summit Road approximately nine miles northwest from Gilroy and along another section 12 miles southeast from Los Gatos, leaving the five-mile private section as the only feasible connection of the two sections.
No party disputed this assertion.
We, therefore, conclude that the property to be condemned is necessary for the proposed IOF project.11
5.4. The Public Benefit of Acquiring the Property by Eminent Domain Outweighs the Hardship to the Owners of the Property
Verizon presented evidence that 65,000 residential and 80,000 business customers will benefit from the increased reliability and data transmission capability of the IOF project. With the completion of the IOF project within the private section of Summit road, up to 200 new customers, who currently have only wireless telephone service available,12 will be able to receive landline telephone service, with high-speed internet service also available to 144.
The Opposing Defendants testified that Verizon has done a poor job of completing trenching work on other portions of Summit Road, and of repairing damage caused by the Contel trenching in the private section of Summit Road. They concluded that they would be subject to the hardship of a deteriorated road, which would require individual landowner efforts or pooled financial contributions to repair. They feared that the road might become impassable, leaving residents no means of egress or ingress to their homes.
In response to the landowners' contentions, Verizon has committed to repair any damage it causes to the roadway. The Opposing Defendants are not persuaded that this commitment sufficiently mitigates the hardships to which they will be exposed.
We begin by noting that the nonexclusive underground utility easement will result in a subsurface four-inch diameter conduit being placed between four and six feet below the road surface. Verizon is not proposing to condemn any residences, businesses, or buildings of any kind. The surface property over Verizon's proposed easement is itself subject to reciprocal negative easements for roadway purposes. It has been a road for many decades and for the reasonably foreseeable future will continue to be a road. There will be no change of use to the surface property with the proposed installation of Verizon's underground conduit. Similarly, there will be no change of use to the subsurface area because Verizon has committed to avoid all existing and planned road traversing facilities. In short, other than the bore pit disturbances addressed below, there will be no discernible difference between the use and appearance of the property subject to Verizon's proposed easement before and after the proposed condemnation.
The public benefits are set out above and are significant. These benefits outweigh the harm to the landowners. We conclude, therefore, that the public benefit of Verizon's proposed condemnation outweighs the private harm. To minimize this harm, we will also order Verizon to implement the project as set forth below.
Verizon's commitment to restoring the disturbances from the bore pits in the road is a useful initial step in addressing the particular hardships imposed upon the defendants. We note that Summit Road is the owners' sole access to their property and is located in a challenging roadway construction environment. Pursuant to § 701 and our policy encouraging widespread deployment of advanced telecommunications services, we find that additional Implementation Requirements should ensure that Summit Road is restored to a sound engineering standard, compliant with all applicable roadway standards, and that Verizon will repair any deterioration to the road caused by its facilities for so long as those facilities are in place, thus substantially mitigating the hardships to be imposed upon the landowners.
Although the scoping memo sought such recommendations from the parties, the Opposing Defendants did not provide specific recommendations. Verizon stated that its construction technique would cause minimal impact to the road, and that the road would be returned to a sound engineering standard. We, therefore, are in the undesirable position of having to develop requirements to minimize the hardships to defendants on our own. Consequently, if the Superior Court permits Verizon to condemn the easements, we will require Verizon and the landowners to meet, confer, and cooperate as necessary to achieve the goal of a road restored to its pre-construction condition. To the extent the parties are unable to agree on sensible steps to be taken, we authorize the Director of the Communications Division, with such additional advice as may be necessary, to oversee and resolve the parties' disagreements regarding the Implementation Requirements set out below.
We, therefore, adopt a set of Implementation Requirements, which are set out in full in Attachment E, and address the following requirements:
· Consultation between Verizon and landowners
· Before and after documentation of roadway conditions
· Installation compliant with roadway engineering standards
· Return roadway to pre-IOF conditions, or better
· Periodic inspections
· Availability of locational information
· Contact information for immediate action, especially during storms
· Permanent responsibility to repair deterioration to road caused by its facilities
Verizon also requires a temporary construction easement for about six weeks of construction. The Opposing Defendants testified that additional road maintenance, especially grading, is needed. Upon conclusion of its construction, Verizon shall grade the road which will immediately benefit all owners and should make up for the short-term inconvenience.
Our goal in imposing the Implementation Requirements is to ensure that the private section of Summit Road is completely restored to its pre-IOF project condition, or better. With the imposition of these Requirements, the harm to the roadway and hardship to the defendants should be substantially mitigated.
5.5. The Proposed Project is Located in a Manner Most Compatible with the Greatest Public Good and Least Private Injury
The IOF project follows Summit Road from Gilroy to Los Gatos, and Verizon has completed about 21 miles of the 26-mile IOF project in two sections. The proposed condemnation is a nonexclusive underground utility easement for an approximately four-inch diameter conduit, placed four to six feet below the roadway. A temporary construction easement is also sought as part of the project. The condemnation will connect the two sections of the IOF project.
The Opposing Defendants offered two alternatives to the IOF project: (1) continuing to rely on the contract with AT&T for trunk line services; and (2) rerouting the IOF to generally follow State Highway 101 through population centers to enable use of public right-of-way. However, neither of these IOF alternatives furthers the Legislature's and the Commission's policy of extending high-speed telecommunications services to underserved areas as would be the case with the IOF project.13
The Summit Road route has a greater level of public good and a lower level of private harm. The Summit Road route will further the policy of bringing high speed internet access to underserved areas, unlike the two proffered alternatives. Both of the alternative projects have greater levels of private harm. Continuing to use the inadequate AT&T contract trunk line imposes lower levels of reliability on Verizon's existing 145,000 customers. Roadway construction permits to install conduit in heavily populated areas with well-known and severe traffic impacts, such as the State Highway 101 corridor, would be difficult to obtain in areas outside of Verizon's service territory and will impose traffic delays and inconvenience on the traveling public in a populous county. In contrast to the harm from the two alternatives, the limited condemnation easement will impose minimal levels of private harm on the 71 Summit Road property owners. Accordingly, even if the proposed project could be replaced as suggested, connecting the existing sections of the IOF in Summit Road is most compatible with the greatest public good and least private injury. We conclude that the proposed condemnation of the limited easement on the private section of Summit Road and the temporary construction easement is most compatible with the greatest public good and least private injury.
5.6. The Public Interest and Necessity Requires the Proposed Project
The Opposing Defendants focused their objection to the condemnation project on their rights as owners of private property. They made clear their lack of faith in Verizon's commitment to maintain the road and their desire to prevent Verizon's activities on their property.
The proposed connection of the two segments of the IOF project on Summit Road will further the public interest by enhancing the reliability and redundancy of high speed internet services in the region, as well as initiating high speed and landline telephone service in an underserved area with limited wireless service. These are significant public benefits. The Opposing Defendants' concerns regarding Verizon's commitment to maintaining the road are addressed with the Implementation Requirements, such that the landowners should experience little, if any, difference in Summit Road's current conditions and after installation of the IOF project.
Balancing the significant public benefits against the nominal burdens placed on the landowners, we conclude that the public interest and necessity require the proposed condemnation. Therefore, pursuant to § 625(a)(1)(A), we find that Verizon's proposed condemnation would serve the public interest. Should Verizon's Superior Court condemnation be successful, Verizon shall comply with the Implementation Requirements set out above.
5.7. The Proposed Project is Exempt from Review Under the California Environmental Quality Act
In the scoping memo, the parties were directed to submit testimony addressing the issue of whether Verizon had made a sufficient demonstration that an exemption to the California Environmental Quality Act (CEQA) would apply to the proposed project.
Verizon presented testimony stating that the proposed project will be undertaken within the right-of-way of Summit Road, an unpaved roadway actively used for over 60 years, and no significant impacts on the physical environment are expected due to construction or operation of the proposed project. As such, it constitutes a minor alteration in the condition of land which qualifies for a Class 4 Exemption from CEQA pursuant to CEQA Guidelines Section 15304.
No other party presented testimony on this issue.
CEQA (Public Resources Code Section 21000, et seq.) applies to discretionary projects to be carried out or approved by public agencies, and requires the Commission to consider the environmental consequences of its discretionary decisions, such as § 625 findings of public interest. A basic purpose of CEQA is to "inform governmental decision-makers and the public about the potential significant environmental effects of the proposed activities." (Title 14 of the California Code of Regulations, hereinafter CEQA Guidelines Section 15002.)
Here, Verizon requests that the Commission find that its proposed condemnation is categorically exempt from CEQA.14 CEQA and the CEQA Guidelines enumerate various categorical exemptions to the requirement for environmental review under CEQA. CEQA Guideline Section 15304 provides an exemption from CEQA review for Minor Alterations to Land, which consists of minor public or private alterations in the condition of land with no tree removal. The proposed easements will result in the placement of telecommunications conduit under an established road bed, with disturbance of less than 2% of the surface roadway. No trees will be removed. Accordingly, we find that the facts submitted by Verizon support a conclusion that the proposed project is exempt from CEQA review.
6 Pub. Util. Code § 709.
7 See, e.g., D.06-08-030, at Conclusion of Law 17, "The demonstrated presence of competitors throughout Verizon's service territory further supports the conclusion that Verizon lacks market power in the voice communications market," and Conclusion of Law 24, "Since Verizon, AT&T, SureWest, and Frontier lack market power in their service territories, price regulation is no longer needed to ensure that their prices are just and reasonable. Such price regulations should be removed."
8 Verizon Opening Post-Hearing Brief, at p. 5 (emphasis in original).
9 Intermodal competition occurs where there are competitive substitutes offered by a different mode of service, e.g., internet-based telephone service. (See, generally, D.06-08-030.)
10 These standards are set forth in § 625(b)(2)(A) - (D). Section 625(b)(1) sets forth an alternative condition for showing "public interest," namely, that the proposed project would provide service to an unserved area.
11 The opposing defendants' argument that there were alternative routes for Verizon's project is addressed in the next section where we conclude that the Summit Road route is superior.
12 Hamlin and Verizon testified that wireless telephone service along Summit Road was less reliable than landline.
13 As noted above, the IOF project has already brought high-speed services to about 250 customers, with availability for another 144 customers if the project in the private section of Summit Road is completed.
14 The Commission is the lead agency.
