4. Differences Among Commission Granted Authority

It is important to distinguish the authority being granted by NDIEC registration, by CPCN and by wireless registration as the respective authority relates to the Commission's ability to recover fines and penalties and to impose restitution.

Given the competitive state of the telecommunications industry, the Legislature intended the registration process to serve as a less onerous option for telephone corporations to be authorized to provide service. As the Commission has implemented the registration process, it is limited to NDIECs and is intended to be ministerial in nature. The application form requires that carriers answer a set of questions and excludes carriers from using the registration process if their responses vary from a prescribed template. This can be either an inability to respond appropriately to certain fitness questions or an indication that the authority sought is more complex, e.g., an applicant for registration cannot construct facilities other than those that would be exempt from requiring review pursuant to the California Environmental Quality Act (CEQA).

Telephone corporations with CPCN authority include the following types of telecommunications service providers:

· Incumbent local exchange carriers (ILECs);

URF LECs¹⁰

Small GRC LECs¹¹

Other ILECs

· Competitive local exchange carriers (CLECs);

· NDIECs (non registrants). This would include those that are proposing to construct facilities that would not be totally exempt from CEQA review where authority broader than just NDIEC is desired or where the specific request referred a review and consideration beyond the registration template checklist.

URF LECs and Small GRC LECs are Carriers of Last Resort (COLR) with regular and ongoing interaction with the Commission. Although regulation of URF ILECs has lessened significantly, Small LECs (also known as GRC LECs) remain subject to cost of service/rate of return regulation. Both URF and GRC LECs have significant physical facilities and personnel directly providing service to large portions of residents in their respective service territories.

Due to the regular, ongoing interactions that the Commission has with the URF ILECs and GRC LECs, the Commission has the ability to able to collect any fines owed, surcharges and fees due, and ensure that customers are compensated when appropriate.

CLECs and NDIECs, however, have been exempted¹² from ratemaking action pursuant to D.95-07-054 (R.95-04-043) and have significantly less regulatory interactions with the Commission than do URF ILECs and GRC LECs. CLECs and NDIECs have been subject to the various qualification requirements set out in D.95-07-054, which are mainly financial in nature,¹³ and do not focus extensively on fitness of the applicants in terms of prior business criminal or corrective problems, such as bankruptcy and/or criminal or regulatory violations.

CPCN authority is obtained through a formal application process pursuant to Pub. Util. Code § 1001,¹⁴ while registration authority is a streamlined process pursuant to Pub. Util. Code § 1013. However, the more formal application process does not enhance the Commission's ability to collect fines or effect restitution. The fundamental information required of applicants in the two tracks is very similar, with the CPCN track providing a review that is better able to identify potential problems in the application and offers more flexibility in addressing applicants with special circumstances that don't fit within the scope of the registration template. For example, if an entity or individual has a problem history and can't use the registration template, but believes it can adequately justify why it should still be granted authority, the CPCN route would be required.

In addition, the current application process does not require applicants to comprehensively disclose prior or pending problems of either a business or criminal nature. While background checks are conducted, this lack of initial information makes complete and successful background checks more challenging.

Finally, recent experience has shown that prospective non-dominant interexchange carriers are choosing the CPCN route over the registration route because of the perception that the CPCN application process has less onerous requirements than the registration process adopted in D.10-09-017, which was supposed to be a simplified, streamline process for entities to request NDIEC operating authority. The registration process currently has both a higher application fee and includes a requirement that the carrier obtain an on-going performance bond. The CPCN process does not currently require a performance bond. Existing registration holders are also seeking to migrate to CPCNs for the same reasons.

When problems arise, the Commission should not encounter difficulty in recovering fines, surcharges, taxes, and fees, and should have a reasonable expectation that customers will be reimbursed or compensated in cases of bankruptcy or fraud.

Wireless telecommunications carriers in California are not subject to the requirement for a CPCN, but are subject to the registration requirements established in D.94-10-031, as modified by D.94-12-042, and D.95-10-032. These wireless registration requirements were adopted to provide the Commission with basic information about wireless carriers operating in the state that is necessary to allow the Commission to locate responsible officers and employees of these utilities, monitor consumer protection issues, and monitor cellular rates.

The Federal Communications Commission (FCC) regulates facilities-based wireless providers, and to a lesser degree resellers of wireless service. Facilities-based wireless providers are subject to rigid FCC licensing examination. Although wireless resellers doing business with the FCC are required to register for an FCC registration number (FRN), the FCC does not require any character qualifications or background check.

For registration of wireless carriers the Commission does not perform any fitness examination at this time. Furthermore, no fees or other requirements are currently required for wireless registrations.

Wireless carriers are "telephone corporations" and therefore public utilities under Pub. Util. Code §§ 216, 233, and 234.¹⁵ (See, e.g., D.01-07-030, Appendix A, Interim Rules Governing Non-Communications-Related Charges on Telephone Bills at 1, 6.) We have exercised our jurisdiction to protect consumers of wireless/cellular telephone services.¹⁶

Before 1993, the Commission had plenary jurisdiction over wireless or CMRS carriers. In 1993, Congress passed the Omnibus Budget Reconciliation Act of 1993 (Budget Act), which amended § 332(c)(3)(A) of the Communication Act as follows:

... no state or local government shall have any authority to regulate the entry of or the rates charged by any Commercial Mobile Service or any Private Mobile Service, except this paragraph shall not prohibit a state from regulating the other terms and conditions of Commercial Mobile Service.¹⁷

Shortly after passage of the 1993 Budget Act, we instituted an investigation of the cellular industry in order "to develop a comprehensive regulatory framework consistent with the Federal Budget Act and our own statutory responsibilities." (OII 93-12-007, Investigation on the Commission's Own Motion into Mobile Telephone Service and Wireless Communications, 1993 Cal. PUC LEXIS 836.) The Commission's jurisdiction over wireless terms and conditions was subsequently confirmed by the California Court of Appeal. (Pacific Bell Wireless (Cingular) v. CPUC, (2005) 140 Cal.App.4th 718, 738; cf. MetroPCS v. FCC (DC Cir. 2011) 2011 U.S. App. LEXIS 9922 (affirming state jurisdiction to resolve CMRS-wireline interconnection disputes).)

Because this Commission has the authority to regulate terms and conditions of wireless carriers and has an interest in protecting California consumers, the Commission has the need for, and the ability to require additional information and a demonstration of financial responsibility.

¹⁰ Uniform Regulatory Framework (URF) local exchange carriers (LECs) as defined in Rulemaking (R.) 05-04-005.

¹¹ Small General Rate Case Local Exchange Carriers.

¹² With the exception of Cox California Telcom, Inc., which is both a CLEC and a COLR.

¹³ Applicants for CPCNs must demonstrate, in their application, sufficient cash flow requirements to meet start up expenses for the first year of local operations and cover any deposits required by IECs and LECs.

¹⁴ CPCN application certification requirements are contained in D.95-07-045, Appendix A at 4. (R.95-04-043 and I.95-04-044 Order Instituting Rulemaking on the Commission's Own Motion into Competition for Local Exchange Service).

¹⁵ Pub. Util. Code §216 defines "public utility" to include "telephone corporation"; § 234 defines "telephone corporation" to include any corporation controlling, operating, or managing a "telephone line" for compensation; and § 233 defines "telephone line" to include any "fixtures" or "personal property" operated or managed "in connection with or to facilitate communication by telephone, whether such communication is had with or without the use of transmission wires."

¹⁶ See also D.01-07-030; D.96-12-071, Investigation on the Commission's Own Motion into Mobile Telephone Service and Wireless Communications (1996) 70 CPUC2d 61, 72-73 [stating that "we still remain concerned that the terms and conditions of service offered by each CMRS provider continue to provide adequate protection to consumers"].

CMRS refers to Commercial Mobile Radio Service, and includes Cellular Services, Personal Communications Services (PCS), Wide-Area Specialized Mobile Radio Services (SMR), Radio Telephone Utilities (RTU or paging) services, and many other wireless services. (D.96-12-071, supra, 70 CPUC2d 61, 65.) The terms "CMRS" and "wireless" are commonly used interchangeably with "cellular."

¹⁷ Codified at 47 USC § 332(c)(3)(A) (emphasis added). The legislative history of this provision of the Communications Act indicates what Congress meant by the language "other terms and conditions":

It is the intent of the Committee that the State still will be able to regulate the terms and conditions of these services [CMRS]. By "terms and conditions" the Committee intends to include such matters as customer billing information and packaging and billing disputes and other such consumer protection matters; facility siting issues (e.g., zoning); transfers of control; bundling of services and equipment; and the requirement that carriers make capacity available on a wholesale basis and such other matters as fall within the State's lawful authority. This list is intended to be illustrative only and not meant to preclude other matters generally understood to fall under "terms and conditions."

(House Report No. 103-111 at 251. Emphasis added.) The FCC also confirmed the CPUC's jurisdiction over "other terms and conditions" when it stated that it anticipated that the CPUC would continue to conduct appropriate complaint proceedings and to monitor the structure, conduct, and performance of CMRS providers. (See May 19, 1995 FCC Order Denying the CPUC's petition to continue to regulate CMRS rates.)