17. Assignment of Proceeding
Michel P. Florio is the assigned Commissioner and Regina M. DeAngelis is the assigned ALJ in this proceeding.
1. On July 18, 1997, the Commission gave to TracFone's predecessor, Topp Telecom, Inc., a Wireless Registration Identification number, U4231C.
2. At some point between 1999 and 2001, Topp Telecom, Inc., began operating under the name "TracFone Wireless, Inc."
3. TracFone operates as a subsidiary of América Telecom, S.A.B. de C.V., a telephone company based in Mexico City.
4. TracFone describes itself as a reseller of telecommunication service, specifically of CMRS.
5. TracFone does not dispute that its wireless telecommunication services include California intrastate wireless calls.
6. TracFone also describes its services as prepaid wireless services, meaning that customers purchase specific quantities of wireless services in advance; no bill is rendered to the customer after TracFone provides service. TracFone also describes its services as debit card services.
7. TracFone states it resells the wireless services of Verizon Wireless, AT&T Mobility, and T-Mobile and that Verizon Wireless, AT&T Mobility, and T-Mobile are all telephone corporations and public utilities under California law.
8. TracFone explains that it uses the term "resale" to mean that, among other things, under its business model, it purchases wireless telecommunication services at wholesale prices from other public utility telephone corporations and, in what TracFone describes as a classic example of arbitrage, it resells these wireless services in the retail market.
9. Under its arbitrage business model, TracFone sets its own rate structures and, as such, does not offer its customers the exact rate structures of TracFone's underlying carriers, Verizon Wireless, AT&T Mobility, and T-Mobile.
10. In reselling its wireless services, TracFone's California customers consider TracFone their wireless carrier for customer service issues.
11. TracFone's prepaid wireless service is marketed and sold under the "TracFone," "Net10," and "SafeLink" brands and, in each case, the customer is required to purchase and activate a TracFone handset (a mobile phone).
12. TracFone customers must load or purchase usage minutes for their handsets (mobile phone).
13. TracFone customers either purchase usage minutes on-line through TracFone's website or via prepaid cards purchased at retail outlets that are then used to re-load the handsets (mobile phone) with additional usage minutes.
14. As of June 2010, TracFone had approximately 16 million customers/subscribers nationwide, including all three of its brands, and describes itself as "the largest operator in the U.S. prepaid cellular market."
15. According to TracFone, its "customer usage" is controlled using patented, proprietary software installed in each mobile phone TracFone sells.
16. TracFone provides customer service and manages customers as though it were a network-based carrier.
17. TracFone sells both its handsets (mobile phones) and airtime (sometimes packaged as "monthly plans") online and through a variety of U.S. retail stores, including Mollie Stone's and Walmart.
18. In 2003, TracFone informed a Commission staff person, Mr. Hassan Mirza, in the Commission's Telecommunications Division of TracFone's understanding that TracFone "does not render any `billings'" which would be reportable on the then-existing forms used to report and calculate the user fees and PPP surcharges.
19. TracFone did not seek clarifications from the Commission of the terms or requirements of its Wireless Registration in this regard, including its obligation to collect and remit public purpose surcharges and user fees.
20. TracFone sought clarification of its responsibilities related to the user fees and public purpose surcharge exclusively through Commission staff.
21. TracFone engaged in one, possibly two, telephone conversations with Commission staff.
22. TracFone claims that the Commission's staff stated that TracFone was exempt from payment of the user fees and public purpose surcharges.
23. TracFone further claims that the Commission's staff statements are equivalent to positions adopted by the Commission.
24. The content of the Commission's staff statements were never adopted by the Commission.
25. TracFone never sought a waiver of the user fees or surcharges from the Commission.
26. By electronic mail dated May 1, 2009, the Commission staff informed TracFone that the user fees and surcharges did apply to TracFone's services.
27. The Commission issued this Investigation proceeding to determine whether the user fees and surcharges apply to TracFone's service and the extent of TracFone's obligation to pay.
28. Similarities exist between TracFone's prepaid wireless service and debit card service but differences exist as well.
29. The amount of past due surcharges owed by TracFone and an appropriate penalty, if any, are the subject of phase 2 of this proceeding.
1. Consistent with the January 26, 2011 ALJ's ruling, no triable issues on any material facts exist as to whether TracFone operates in California as a public utility and a telephone corporation.
2. Consistent with the January 26, 2011 ALJ's ruling, TracFone is a California public utility and a telephone corporation under Cal. Const., art. XII, § 3; Pub. Util. Code §§ 216, 233, and 234.
3. Because TracFone's services are sold at many retail establishments throughout California, via the internet, and may be purchased by calling TracFone's customer care center, TracFone's services are open to the public and available to substantially all who seek such service.
4. TracFone's telecommunication services are dedicated to the public use and, under the dedication test, TracFone operates as a public utility in California.
5. It is well-established that resellers of telecommunication services operate as public utilities in California and, therefore, TracFone's analysis of §§ 233 and 234 that it is not a public utility under California law is incorrect.
6. The language set forth in § 234 stating that a telephone corporation includes "owning, controlling, operating or managing any line in California," includes entering into an arrangement with facilities-based carriers to operate on a non-facilities basis and resell the telecommunications services to end user customers under a carrier's own name and rate structure.
7. Ownership of property is not the sole defining characteristic of public utility status. Public utility status has routinely been established upon lease arrangements.
8. Pursuant to statutory law, including §§ 401 and 431, public utility telephone corporations are obligated to pay the user fees set forth in §§ 401-410, 431-435.
9. In examining and interpreting the words of a statute, courts are guided by the plain meaning of the statutory language and courts will adopt a literal interpretation unless it is repugnant to the obvious purpose of the statute.
10. The plain language of §§ 401-410, 431-435 obligates all telephone corporations, including TracFone, to pay the user fees.
11. No exceptions to the application of the user fees to public utility telephone corporations are found in the statute. No exceptions are found in Commission decisions.
12. TracFone, as a public utility telephone corporation, is obligated to remit the user fees set forth in §§ 401-410, 431-435 and TracFone is in violation of state law for failure to pay the user fees set forth in §§ 401-410, 431-435.
13. The plain language of §§ 871 et seq. does not specifically identify either the types of public utilities that must collect the universal lifeline surcharges or the types of utility services to which the surcharges applies.
14. Sections 871 et seq. provide the Commission with the authority to implement the program and to develop a funding mechanism for the program, including the types of public utilities that must collect the universal lifeline surcharges and the types of utility services to which the surcharges applies.
15. In D.84-04-053, the Commission confirmed that its statutory responsibility to establish a funding mechanism for the universal lifeline surcharge reasonably included the identification of the services, i.e., the types of public utilities or the specific utility services, subject to the surcharge.
16. In D.94-09-065, the Commission explicitly included cellular service, such as TracFone's services, as one of the services subject to the universal lifeline surcharge and confirmed this determination in D.96-10-066.
17. Based on the language in D.94-09-065 and D.96-10-066 pertaining to cellular service, the universal lifeline surcharge applies to TracFone's cellular service unless an exemption applies.
18. In D.94-09-065, the Commission adopted certain exceptions to the application of the universal lifeline surcharge, including coin-sent paid calling, one-way radio paging, ULTS billing, and then-existing contracts.
19. In D.94-09-065, D.96-10-066, and GO 153, the Commission did not intend to draw a distinction, for purposes of applying the universal lifeline service surcharge, between revenue derived from billed services and revenue derived from unbilled services, including services such as TracFone's prepaid wireless service.
20. The coin-sent paid calling exception to the universal lifeline surcharge does not include all unbilled services.
21. The Commission's preferred customer base for the universal lifeline service surcharge is the "widest possible customer base," and the Commission has expressed a dislike for narrowly applying the surcharge.
22. In seeking to act consistent with the Commission's preferred "widest possible" scope for the customer base, we conclude that the Commission did not intend the coin-sent paid calling exception to the universal lifeline service surcharge to extend to all unbilled or prepaid services.
23. TracFone's interpretation of the Commission's coin-sent paid calling exception in D.94-09-065 to apply to all unbilled services is based on conjecture and is not consistent with Commission's explicit directives in that decision to broadly apply the surcharge.
24. The debit card exemption first appeared in D.96-10-066 and, at that time, the Commission provided no explanation for the rationale for this additional exemption.
25. In the absence of any statements by the Commission on this topic, TracFone's assertion that the debit card exemption falls within TracFone's rationale - no bills - for the coin-sent paid calling exemption fails.
26. In the absence of an explicit Commission rationale for the debit card exemption, TracFone's assertions that the Commission intended to include its prepaid wireless services within the debit card exception is unconvincing.
27. The differences between the TracFone's service and debit card service are material. For example, TracFone's prepaid wireless services include a telephone number and must be used with a TracFone handset (mobile phone).
28. TracFone's prepaid wireless service is equivalent to dial tone access and a full service telephone offering while, in comparison, debit cards provide a very limited type of telecommunications service.
29. TracFone's prepaid wireless service fails to fall within the debit card exemption to the universal lifeline surcharge.
30. The universal lifeline surcharge set forth in §§ 871 et seq. and related Commission decisions applies to TracFone's prepaid wireless services, and TracFone acted unlawfully by failing to pay this surcharge.
31. Regardless of how the universal lifeline and other surcharges are calculated, collected, and remitted, the telecommunications carrier, not the customer, is ultimately responsible for payment of the surcharges.
32. Neither GO 153 nor the Commission's decisions are dispositive on the question of ultimate responsibility for the surcharge, and, therefore, we look to the language of the statutes and find the utility is ultimately responsible for ensuring payment of the proper surcharge amount.
33. TracFone's failure to pay the universal lifeline surcharge is a violation of state law and Commission decision, including §§ 871 et seq.
34. Similar to the statutory framework for §§ 871 et seq., the statutory language for the Deaf and Disabled Telecommunications Program Fund delegates to the Commission the responsibility to develop a funding mechanism.
35. The Commission developed this funding mechanism in D.94-09-065, where the Commission explicitly included cellular service, such as TracFone's, as one of the services subject to this surcharge. The Commission confirmed this determination in D.96-10-066. The Commission also memorialized its determination in GO 153.
36. The relevant statutory framework for the universal lifeline surcharge and the Deaf and Disabled Telecommunications Program surcharge are the same.
37. TracFone is ultimately responsible for payment of the Deaf and Disabled Telecommunications Program surcharge to fund the Deaf and Disabled Telecommunications Program set forth in §§ 2881 et seq.
38. TracFone acted unlawfully by failing to pay the Deaf and Disabled Telecommunications Program surcharge.
39. Section 275 addresses a program referred to as the California High Cost Fund-A and delegates to the Commission the responsibility to develop a funding mechanism for this program.
40. In D.94-09-065, the Commission explicitly included cellular service, such as TracFone's, as one of the services subject to the California High Cost Fund or CHCF, including the California High Cost Fund-A.
41. The relevant statutory framework for the universal lifeline surcharge and the California High Cost Fund-A surcharge are the same.
42. TracFone is ultimately responsible for payment of the surcharge to fund the California High Cost Fund-A set forth in §§ 275 et seq.
43. TracFone's services are subject to the California High Cost Fund-A surcharge and TracFone is responsible for payment of the surcharge.
44. TracFone acted unlawfully by failing to pay the California High Cost Fund-A surcharge.
45. Section 276 addresses, among other things, a program referred to as the California High Cost Fund-B.
46. Section 276 delegates to the Commission the responsibility to develop a funding mechanism for this program.
47. In D.96-10-066, the Commission implemented a funding mechanism for the California High Cost Fund-B and explicitly included cellular service, such as TracFone's, as one of the services subject to the California High Cost Fund-B.
48. The relevant statutory framework for the universal lifeline surcharge and the California High Cost Fund-B surcharge are the same.
49. TracFone is ultimately responsible for payment of the surcharge to fund the California High Cost Fund-B set forth in §§ 276 et seq.
50. TracFone's service is subject to the High Cost Fund-B surcharge and TracFone is responsible for payment of this surcharge.
51. TracFone acted unlawfully by failing to pay the High Cost Fund-B surcharge.
52. Section 280 addresses a program referred to as the California Teleconnect Fund.
53. Section 280 delegates to the Commission the responsibility to develop a funding mechanism for the California Teleconnect Fund.
54. In D.96-10-066, the Commission implemented a funding mechanism for the California Teleconnect Fund and explicitly included cellular service, such as TracFone's, as one of the services subject to the California Teleconnect Fund.
55. TracFone is ultimately responsible for payment of the surcharge to fund the California Teleconnect Fund surcharge set forth in §§ 280 et seq.
56. The relevant statutory framework for the universal lifeline surcharge and the California Teleconnect Fund surcharge are the same.
57. TracFone's services are subject to the California Teleconnect Fund surcharge and TracFone is responsible for payment of this surcharge is based on the same reasoning set forth above regarding the universal lifeline surcharge.
58. TracFone acted unlawfully by failing to pay the California Teleconnect Fund surcharge.
59. Section 281 addresses a program is referred to as the California Advanced Services Fund.
60. Section 281 delegates to the Commission the responsibility to develop a funding mechanism for this program.
61. D.07-12-054 implemented a funding mechanism for the California Advanced Services Fund.
62. D.07-12-054 found that "All telecommunications carriers are required to charge all end users, the California Advanced Services Fund surcharge, as set by the Commission, except for ULTS billings, coin-sent paid calling, debit card messages, one-way radio paging, usage charges to COPTs, customers receiving services under existing contracts, and directory advertising."
63. The California Advanced Services Fund applies to all end users of all telecommunications carriers.
64. TracFone is a telecommunications carrier and, therefore, the surcharge applies to TracFone's end users.
65. TracFone is ultimately responsible for payment of the surcharge to fund the California Advanced Services Fund surcharge set forth in § 281.
66. The relevant statutory framework for the universal lifeline surcharge and the California Advanced Services Fund surcharge are the same.
67. TracFone's service are subject to the California Advanced Services Fund surcharge and TracFone is responsible for payment of this surcharge based on the same reasoning set forth above regarding the universal lifeline surcharge.
68. TracFone acted unlawfully by failing to pay the California Advanced Services Fund surcharge.
IT IS ORDERED that:
1. The Commission adopts the Administrative Law Judge's ruling issued in this proceeding and dated January 26, 2011 finding as follows: TracFone Wireless, Inc. operates within California as a public utility and a telephone corporation under Cal. Const., art. XII, § 3; Pub. Util. Code §§ 216, 233, and 234.
2. TracFone Wireless, Inc. shall immediately begin collecting and remitting the user fees, §§ 401-410, 431-435, and the public purpose program surcharges, the Universal Lifeline Telephone Service § 879 and §§ 270 et seq., the Deaf and Disabled Telecommunications Program § 2881 and §§ 270 et seq., California High Cost Fund-A § 275, § 739.3 and §§ 270 et seq., California High Cost Fund-B § 276, § 739.3 and §§ 270 et seq., California Teleconnect Fund § 280 and §§ 270 et seq., California Advanced Services Fund § 281, on its prepaid wireless services provided after the effective date of this decision.
3. In phase 2 of Investigation 09-12-016, the Commission shall determine the amount of user fees and surcharges owed, if any, by TracFone Wireless, Inc. (TracFone) and whether TracFone is subject to penalties pursuant to the provisions of Pub. Util. Code §§ 2100, et seq. for failure to pay the user fees and surcharges on its prepaid wireless services provided prior to the effective date of this decision.
4. Investigation 09-12-016 remains open.
This order is effective today.
Dated February 16, 2012, at San Francisco, California.
MICHAEL R. PEEVEY
President
TIMOTHY ALAN SIMON
MICHEL PETER FLORIO
CATHERINE J.K. SANDOVAL
MARK J. FERRON
Commissioners
