ALJ/RMD/MOD-POD/lil Date of Issuance 2/24/2012

Decision 12-02-032 February 16, 2012

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Investigation on the Commission's own motion into the alleged failure of TracFone Wireless, Inc. (U4321C) to collect and remit public purpose program surcharges and user fees on revenue from its sale of intrastate telephone service to California consumers, in violation of the laws, rules and regulations of this State; Order to Show Cause why Respondent should not immediately be ordered to pay all such outstanding sums plus interest, and be subject to penalties for such violations.

Investigation 09-12-016 (Filed December 17, 2009)

MODIFIED PRESIDING OFFICER'S DECISION FINDING
TRACFONE WIRELESS, INC. ACTED UNLAWFULLY BY
FAILING TO PAY TELECOMMUNICATION USER FEES AND
PUBLIC PURPOSE PROGRAM SURCHARGES

MODIFIED PRESIDING OFFICER'S DECISION Finding
TracFone Wireless, Inc. Acted Unlawfully by
failing to pay telecommunication user fees
and PUBLIC PURPOSE PROGRAM SURCHARGES 11

1. Summary 22

2. Issues 33

3. Jurisdiction 33

4. Standard of Review and Burden of Proof 44

5. Procedural History 55

6. Statement of Facts 1010

7. TracFone is a Public Utility and Telephone Corporation
Under the Public Utilities Code 1414

8. All Public Utility Telephone Corporations, Including
TracFone, Must Pay the User Fees Set Forth in Pub. Util.
Code §§ 401-410, 431-435 1919

9. The Universal Lifeline Surcharge Set Forth in Pub. Util. Code
§§ 871 et seq. Applies to TracFone's Prepaid Wireless Services 2121

9.1. Section 871 et seq. Delegates to the Commission the
Power to Establish a Funding Mechanism for the
Universal Service Surcharge 2222

9.2. Commission Decisions Establish that the Universal
Lifeline Surcharge Applies to Cellular Services,
such as TracFone's 2323

9.3. Commission Decisions Establish Narrow Exceptions
to the Application of the Universal Lifeline Surcharge
to Cellular Service 2626

9.4. The Commission's Coin-Sent Paid Calling Exception
is Narrow and does not Exempt all Unbilled Services from the Universal Lifeline Surcharge 2626

9.5. The Commission's Debit Card Exemption is Narrow
and does not Exempt All Prepaid Wireless Srvices
from the Universal Service Surcharge 2929

9.6. Regulated Utilities, not Customers, are Ultimately
Responsible for Payment of the Universal Lifeline Surcharge 3131

10. Deaf and Disabled Telecommunications Program Fund 3333

11. California High Cost Fund-A 3535

12. California High Cost Fund-B 3636

13. California Teleconnect Fund 3838

14. California Advanced Services Fund 4040

15. Conclusion 4141

16. Appeal of Presiding Officer's Decision 4141

17. Assignment of Proceeding 4444

Findings of Fact 4444

Conclusions of Law 4747

ORDER 5555

MODIFIED PRESIDING OFFICER'S DECISION FINDING
TRACFONE WIRELESS, INC. ACTED UNLAWFULLY BY
FAILING TO PAY TELECOMMUNICATION USER FEES AND
PUBLIC PURPOSE PROGRAM SURCHARGES

1. Summary

The evidence establishes that TracFone Wireless, Inc. (TracFone) operates within California as a public utility and a telephone corporation under Cal. Const., art. XII, § 3; Pub. Util. Code §§ 216, 233, and 234.¹ The evidence further establishes that the user fees and the public purpose program surcharges² apply to the prepaid wireless services provided by TracFone and that TracFone is ultimately responsible for the payment of these user fees and surcharges. As such, we find that TracFone violated statutory law and Commission decisions in failing to ensure the payment of these surcharges. We will consider the issue of whether a penalty is appropriate and the amount owed, if any, in past due surcharges as a result of TracFone's violations in phase 2 of this proceeding. The proceeding remains open for consideration of phase 2.

¹ All statutory references are to the Public Utilities Code unless otherwise stated.

² As used herein, the user fees are described in §§ 401-410, 431-435 and the public purpose program surcharges include 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.