2. Background

In Rulemaking (R) 09-07-009, the California Public Utilities Commission (Commission or CPUC) responded to concerns identified in the State Controller's 2007 Audit Report³ (Audit Report) by opening a proceeding to consider registration license reforms for Non-Dominant Interexchange Carriers (NDIECs).

The Audit Report found that the Commission's collection efforts were ineffective against companies that had ceased to operate or filed for bankruptcy before or after fines were imposed. The Audit Report recommended, among other things, that the Commission conduct more stringent background and financial viability reviews of individuals or companies registering with the Commission, and that the Commission require the posting of a performance bond for NDIEC registration pursuant to the provisions of Pub. Util. Code §1013. At the conclusion of the rulemaking, the Commission issued D.10-09-017, which adopted revised compliance requirements for new applicants and existing NDIEC registration holders, as follows:

· Performance Bonds⁴ - All NDIEC registration licensees are required to post a bond in order to obtain or retain authority to provide telecommunications services as an NDIEC, and to secure the payment of any monetary sanction (i.e. fines, penalties, restitution) imposed in any enforcement proceeding brought under § 1013(f) of the Pub. Util. Code against any NDIEC.⁵ The bond amount must equal 10% of gross intrastate revenues reported to the Commission during the preceding calendar year or $25,000, whichever is greater. For new registrants who have not previously reported intrastate earnings, the bond requirement is $25,000;

· Background Review of Applicants - All new NDIEC registration licensees must submit as part of the application process, resumes of all key officers and owners of 10% or more of outstanding shares that indicate sufficient managerial and technical experiences; disclose prior or current known investigations by any governmental agency, and any settlements with any regulatory agency over its business conduct or practices, disclose voluntary payments made by an applicant or its principals to resolve action by regulatory agencies, attorneys general, or courts, or any other type of monetary forfeitures;

· Application Fee - All NDIEC registration licensees (including new and transferred registration licensees) must pay an application fee set at $250 (an increase from the previous $75 fee); and

· Annual User Fee - All NDIEC registration licensees must pay a minimum annual user fee of $100 or 0.18% of gross intrastate revenue,⁶ whichever is greater, for registration licensees, including those licensees reporting no intrastate revenues.

Although the above licensing reforms only apply to NDIEC registration applicants and registration holders that have obtained authority under Pub. Util. Code § 1013, we made all telecommunications corporations respondents in R.09-07-009, noting that the proposed changes might be extended in the future to other competitive telecommunication providers. We have substantially concluded R.09-07-009⁷ and, based on both its results and subsequent Commission experience with the registration and CPCN processes, now turn our attention to which of these or other licensing reforms are needed for carriers seeking, holding or transferring CPCN certification, and for wireless resellers seeking or holding Wireless Identification Registration (WIR) registration.

³ John Chiang, California State Controller, "California Public Utilities Commission - Report of Review, Fines and Restitution Accounting and Collection," August 2007.

⁴ Performance bond is defined in this rulemaking as a commercial surety or financial guarantee bond, which is issued by an insurance company or a bank, for the purpose of facilitating collection of any monetary sanction (i.e. tax, surcharge, fee, fine, penalty and restitution).

⁵ By Decision (D.) 11-09-026 the Commission modified D.10-09-017 to require that the performance bond also secure the payment of taxes or fees or both pursuant to Pub. Util. Code § 1013(e). The overall dollar amount of the required bond was not changed.

⁶ The current fee is 0.18% but is adjusted periodically by the Commission pursuant to Pub. Util. Code § 431.

⁷ Two petitions for modification are pending.