Comments on Draft Decision and Report

The draft decision of Administrative Law Judge Bushey in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Rules.

AT&T Communications of California filed comments supporting the draft decision and the determination that expanding the definition of basic service to include broadband services is not feasible. Verizon California, Inc. (Verizon) filed comments stating that the report submitted to the Legislature properly concluded that broadband services should be included in the definition of basic services at this time. Roseville Telephone Company's comments agreed that it is infeasible at this time to redefine universal service to include access to broadband services and supported closing the docket. La Raza² filed comments raising both procedural and substantive issues that are addressed below. The Office of Ratepayer Advocates filed reply comments in which it echoed Verizon's quotation of a report from the Federal Communications Commission which concluded that: "the cost of adding advanced services to the definition of supported services would be contrary to the public interest and that these services are not yet considered to be essential." The Latino Issues Forum and the Greenlining Institute also filed reply comments. These groups recommended that the Commission appoint a blue-ribbon panel of experts in advanced telecommunications technologies and representatives of low-income communities to formulate a long-term plan for implementing SB 1712 including deployment of advanced technologies to universal service customers. These groups also recommended further expansion of the CTF for community-based organizations.

A. La Raza's Procedural Issues

La Raza raised allegations of three procedural errors. These allegations focus on the Commission failing to provide for the parties to review and comment on information contained in the report. The allegations are not persuasive, however, because the parties have reviewed and commented on the report. Every party, except La Raza, that filed such comments agreed with the conclusions of the report. La Raza's substantive comments on the report are addressed separately below.

La Raza's first procedural allegation is that the parties did not have an opportunity to comment on the substance of the report in violation of Rule 8.1 of the Commission's Rules of Practice and Procedure (Rules) and Pub. Util. Code § 311(d). We note that the draft decision specifically sought comment on the report and that La Raza submitted such comments, which are discussed below. Should the Commission have found those comments persuasive, the Commission could have in this decision reached conclusions that differed from the report and transmitted those revised conclusions to the Legislature.

Second, La Raza took issue with the language of the decision that suggested that the entire Commission had approved the report when, in fact, only the assigned Commissioner and the President of the Commission had transmitted the report. A finding of fact has been corrected in this respect.

Third, La Raza contended that the report relied on evidence not contained in the record, which violated Rule 1.2. As noted by La Raza, the report includes a cost study performed by the Commission's Telecommunications Division as well as research performed by the Commission's Division of Strategic Planning. This information is clearly stated in the report, along with all assumptions and citations. La Raza has submitted comments on the information, alleging that it contains errors. The report is included in the record of this proceeding.

B. La Raza's Substantive Issues

La Raza's substantive issues focus on the Legislature's statutory directive to the Commission and the cost estimate for expanding the definition of basic service to include broadband. Both of these issues were raised in La Raza's earlier comments, and were addressed in the report.

La Raza took issue with the draft decision's determination that the Commission has completed the work assigned by the Legislature in SB 1712. La Raza stated that the statute directs the Commission to incorporate advanced technologies in the definition of basic service and that the Commission has not done so.

This issue is at the core of La Raza's substantive objections to the report. La Raza contends that the Legislature has determined that the definition of basic service should be expanded to include broadband and that the only determination to be made by the Commission is how best to accomplish this directive. La Raza's reading of the statute, however, is incomplete.

In Pub. Util. Code § 883(b)(1), the Legislature directed the Commission to investigate the "feasibility" of expanding the definition of basic service to include broadband services. The Legislature defined "feasibility" in Pub. Util. Code § 871.7(d) as being consistent with all of the following: (1) technological and competitive neutrality, (2) equitable distribution of the costs among all regulated and non-regulated customers, and (3) benefits that justify the costs. The report considers each of these standards, and the Commission's own standards for re-defining basic service, and concludes that the standards have not been met. Having found that the standards have not been met, the report determines that the definition of basic service should not be expanded at this time.

La Raza's next substantive issue is with specific details of the cost analysis provided by the Commission's staff. La Raza provided a declaration in support of its assertion that re-defining basic service to include broadband is feasible. La Raza's own declaration, however, argued that a $20-a-month charge for broadband is feasible if more than 50% and close to 65% of the customers purchase such service. La Raza does not state how such a purchase rate would be achieved. However, even if we assume La Raza's hypothesized purchase rate, the current lifeline subsidy rate of one-half unsubsidized charges would result in an additional cost of $10 per month to all lifeline customers. (All non-lifeline customers would pay the remaining $10 per month via increased surcharges.) This would result in almost tripling the monthly fee (from $5.34 to $15.34) for all the low-income customers, and greatly increasing the lifeline surcharge for all other customers. Consequently, even if we disregard our staff's work and accept La Raza's cost study, the conclusion in the report remains valid-lifeline rates would substantially and unacceptably increase.