Background
The Respondents
Pacific Bell, a California corporation, is a subsidiary of SBC Communications Inc. Pacific Bell is California's largest local exchange carrier. PBI, also a California corporation, is a subsidiary of Pacific Bell and an Internet service provider (ISP) with no Commission operating authority. 2 ASI, a Delaware corporation and subsidiary of SBC Communications Inc., is a Commission-certificated competitive local exchange carrier in California and operates in the entire thirteen-state SBC region. ASI states that its principal product in California today is wholesale DSL transport service sold to ISPs for use in high speed Internet access arrangements.
Pacific Bell began offering DSL transport to business customers in 1998 and to residential customers in 1999, both for use with their chosen ISPs. At the same time, it also sold directly to ISPs at volume prices. In February 2000, PBI began offering consumers a bundled ISP package of DSL transport, which it purchased from Pacific Bell, and Internet access. PBI used Pacific Bell's billing and collection service and customers saw a single price for the bundled package on the PBI page of their Pacific Bell bills. In May 2000, Pacific Bell transferred its DSL transport responsibilities to ASI (referred to as "the SBC-ASI conversion"), reportedly as a result of conditions imposed by the Federal Communications Commission in the SBC and Ameritech merger proceeding. Thereafter, ASI initially provided DSL transport to both end-user customers and ISPs, including PBI. Pacific Bell continued to provide billing and collection services to both PBI and ASI. In some cases ASI's transport services and PBI's Internet services appeared on users' bills split onto separate ASI and PBI pages, and in others ASI billed its transport to the ISP. Where that ISP was PBI, PBI in turn billed the end-user through its page on Pacific Bell's bills. By the end of 2001, ASI had moved to a purely wholesale model and today no longer bills DSL transport to end-users.
The Issues
On January 7, 2002, UCAN filed complaint Case (C.) 02-01-007 against Pacific Bell setting forth various allegations concerning Pacific Bell's billing, customer service, disconnection and marketing practices, and tariff inadequacies, all relating to Pacific Bell's DSL service.
On January 23, 2002, the Commission issued Order Instituting Investigation (I.) 02-01-024 into, among other things, various DSL and Internet service billing and customer service-related practices by Respondents Pacific Bell and its affiliates, PBI and ASI. The investigation was to afford CSD a forum to advance its evidence of violations of the law and Commission orders, and for Pacific Bell, PBI and ASI to respond.
UCAN's complaint and the Commission's investigatory order set forth some allegations that overlapped and some that were unique. The Assigned Commissioner's Scoping Ruling summarized the resulting issues:3
1. Did any or all of the Respondents violate Section 2890 by placing charges on a subscriber's telephone bill for products or services the purchase of which the subscriber did not authorize?
2. Did Pacific Bell violate Ordering Paragraph 2 of Decision (D.) 00-03-020 as modified by D.00-11-015, which requires billing telephone companies to maintain accurate and up-to-date records of all customer complaints made to or received by them for charges for products or services provided by a third party, including corporate affiliates?
3. Did Pacific Bell violate Ordering Paragraph 2 of D.00-03-020 as modified by D.00-11-015, which requires billing telephone companies to create a calendar month summary report of all customer complaints received each month for each service provider and billing agent for charges by a third party, including corporate affiliates, and provide it to the Director of Consumer Services Division quarterly?
4. Did Pacific Bell violate Section 702 by violating Ordering Paragraph 2 of D.00-03-020 as modified by D.00-11-015?
5. Did Pacific Bell violate Section 2890 or D.00-03-020 as modified by D.00-11-015 by threatening customers with disconnection or toll restriction due to unpaid DSL charges?
6. Did Pacific Bell violate D.00-03-020 as modified by D.00-11-015 by failing to timely file and serve advice letters to conform its tariffs to the portions of those orders eliminating its authority to disconnect local service for nonpayment of interexchange service?
7. Should Pacific Bell and/or ASI be ordered to pay reparations pursuant to Section 734?
8. Should any or all of the Respondents be fined pursuant to Sections 2107 and 2108, or punished for contempt pursuant to Section 2113, for violations of the Public Utilities Code or any order, decision, rule, direction, demand or requirement of the Commission?
Procedural History
Both the complaint and the investigation were preliminarily designated as adjudicatory proceedings expected to require hearing. Assigned Administrative Law Judge (ALJ) McVicar consolidated the two proceedings by a ruling issued on February 8, 2002, and Assigned Commissioner Wood and ALJ McVicar conducted a prehearing conference on February 19, 2002.
The scope of the proceeding was as established in I.02-01-024, Ordering Paragraph 1, and C.02-01-007. The Assigned Commissioner's scoping ruling defined the issues as set forth above and designated the ALJ as the presiding officer.
On April 8, 2002, in response to a UCAN notice of intent, the ALJ issued a ruling finding UCAN eligible to claim intervenor compensation under Section 1801 et seq.
In preparation for evidentiary hearings, CSD and UCAN submitted extensive prepared testimony, including dozens of declarations from California consumers who had made complaints alleging DSL Internet service-related billing errors, an analysis of hundreds of DSL billing-related consumer complaints to the Commission's Consumer Affairs Branch, and analyses of many thousands of like complaints to Respondents' organizations. Respondents provided prepared testimony from eight individuals familiar with the company organizations and practices that played a role in their DSL billing problems.
The week before evidentiary hearings were scheduled to begin, the settling parties contacted the ALJ to report that they were engaged in negotiations that they believed could successfully resolve all issues. The ALJ agreed to adjourn the first week of hearings on a day-to-day basis to allow them to continue their negotiations, subject to beginning evidentiary hearings immediately if and when any party reported that they were no longer making satisfactory progress. At the last day of evidentiary hearing on July 3rd, the parties answered questions from the ALJ on the latest, nearly-final version of the settlement. They executed the final settlement agreement and filed it with an accompanying motion later that afternoon.
Under Rule 51.1(b), prior to signing any settlement, the settling parties must convene at least one conference with notice and opportunity to participate provided to all parties. They did so in this case. The Utility Reform Network (TURN), the only party not signing the settlement, was not active in the proceeding and has informed the other parties and the ALJ that it neither supports nor opposes the settlement.
2 PBI also does business as SBC Internet Services.3 The section citations here and elsewhere in today's decision area to the Public Utilities Code unless otherwise noted.
