III. Discussion
A. Approval of Parties' Settlement Agreement
Because all parties to the proceeding have agreed to the settlement, the case should be analyzed pursuant to the Commission's settlement rules. In order for a settlement to be approved by the Commission, the settlement must be: (1) reasonable in light of the whole record, (2) consistent with the law, and (3) in the public interest. (Commission Rule 51.1(e).) Each element is present here.
1. Reasonableness in Light of the Whole Record
The parties contend the Settlement Agreement is reasonable in light of the whole record:
The Parties believe that MCI has fully responded to the Commission's concerns as raised in the OII. MCI has acknowledged the seriousness of the concerns raised by the OII and that such concerns relate to inappropriate practices that should not occur and for which preventative measures should be taken. MCI has, in fact, instituted preventative and remedial measures designed to address these issues, has confirmed that it will continue to adhere to such measures, as set forth in the Settlement Agreement. Furthermore, MCI has, where appropriate, issued credits to customers and has committed to continue to do so. Finally, MCI has agreed to make a payment into the State General Fund. Therefore, the proposed Settlement Agreement is very closely based on the record developed by the Parties, and is reasonable because it effectively addresses the specific issues raised by the evidentiary record.
We agree that the settlement is reasonable in light of the record. MCI admits to problems in the past and commits to solutions to avoid them in the future. It will institute preventative and remedial measures to carry out its promise. It will repay individuals who were wronged. Finally, it will make a substantial payment to the General Fund. We find each of these steps warranted and reasonable based on the record before us.
Particular portions of the Settlement Agreement merit special discussion. With the responses and other information the parties have furnished, as discussed below, we are satisfied that these provisions are reasonable.
a. Paragraph 25: "Good Faith and Commercially Reasonable Efforts"
In her October 7, 2005 ruling, the Administrative Law Judge (ALJ) asked the parties to explain how the Commission could ensure enforcement of the provision in paragraph 25 of the Settlement Agreement requiring MCI to use
good faith and commercially reasonable efforts to enhance its billing policies and procedures, particularly with regard to identifying cause and ultimately preventing complaints regarding alleged unauthorized billings of MUFs. MCI will also continue to use such efforts with respect to identifying and crediting consumers charged with an MUF where MCI determines that it is appropriate to do so.
The parties responded that, "If CPSD is not satisfied with the efforts undertaken by MCI, CPSD may make appropriate inquiries to obtain satisfactory responses as to whether MCI made reasonable good faith efforts to identify complainants and pay refunds or issue credits. In order to enforce this agreement, CPSD may schedule meetings or propound data requests as necessary. If there is a dispute, CPSD or MCI may file a petition to modify or enforce the decision."6
We will add this requirement to the order we issue in this decision. Having a means of ensuring that MCI is complying with the foregoing provision helps support the conclusion that the settlement is reasonable.
b. Paragraph 30: Jurisdiction
Paragraph 30 of the Settlement Agreement states that, "By entering into this Agreement, MCI does not waive its right to contest the extent of the Commission's jurisdiction or authority to impose any requirement of this Agreement in any other proceeding." In expanding on this provision in the Supplement, MCI stated that, "In this case MCI did not and will not contest jurisdiction. Thus, the Commission can enforce the Settlement Agreement in this case without MCI raising concerns over jurisdiction."7 We add an ordering paragraph to this decision making clear that the Settlement Agreement is enforceable before this Commission.
c. MCI's Merger With Verizon
In her October 7, 2005 ruling, the ALJ asked MCI to comment upon the implication of the merger between Verizon and MCI, which this Commission recently approved.8 The ALJ asked "What will happen to the $2.3 million payment if the Commission approves the MCI-Verizon merger?"
In the Supplement, the parties responded that "the Settlement Agreement contains a provision that already provides for the possibility of a merger, and that it does not need to be amended."9
Paragraph 33 of the Settlement Agreement states as follows:
33. Successors. This Agreement and all covenants set forth herein shall be binding upon and shall inure to the benefit of the respective Parties hereto, their successors, heirs, assigns, partners, representatives, executors, administrators, subsidiary companies, divisions, units, agents, attorneys, officers, and directors.
Finally, MCI states that it "believes the transaction will not affect the regulatory authority of the Commission over any of MCI's regulated subsidiaries. Verizon's subsidiaries and the MCI Subsidiaries10 will continue to meet all of their obligations and commitments under the Commission's rules, regulations, and orders, including any orders entered in this matter."
We are satisfied by the foregoing evidence that the Settlement Agreement adequately binds Verizon.
We find that the settlement is reasonable in light of the whole record.
The proposed settlement is consistent with the law. Pub. Util. Code §§ 2889.5 and 2890 prohibit slamming and cramming. MCI has agreed to cease the slamming and cramming practices alleged in the OII, and to make operational improvements designed to better ensure compliance with the statutory prohibitions on slamming and cramming.
The proposed settlement is also consistent with recent Commission-approved settlements relating to telecommunications billing issues. In D.02-10-073 (approving a settlement of Utility Consumers' Action Network (UCAN) v. Pacific Bell Telephone Company, Case 02-01-007) and D.05-03-004 (approving a settlement of the Investigation of Vycera Communications, Inc., Investigation (I.) 04-07-005), the carriers agreed, as MCI does here, to operational improvements in addition to monetary payments to the state General Fund. In D.02-10-073, for example, we found that a settlement met the public interest test because it contained provisions to prevent the improper practices from recurring, and provided a substantial penalty to ensure future compliance with all applicable laws.11
We consider the following factors in setting the amount of a fine or penalty in connecting with slamming and cramming: (1) the severity of the offense; (2) the conduct of the utility, including the utility's conduct in preventing the violation, detecting the violation, and disclosing and rectifying the violation; (3) the financial resources of the utility; and (4) the totality of the circumstances in furtherance of the public interest. (See, e.g., Investigation of Telmatch Telecommunications, Inc., I.99-09-001, D.03-06-034; Investigation of Qwest Communications Corp., I.00-11-052, D.02-10-059.) In connection with the Settlement Agreement here, CPSD explains that it thoroughly explored each of these factors with MCI, and believes that the monetary payment set forth in the Settlement Agreement strikes an appropriate balance.
We agree, and find that the settlement is consistent with the law.
3. In the Public Interest
Finally, we find that the settlement is in the public interest. The proposed Settlement Agreement compensates consumers for unauthorized fees, protects them against future similar charges, and provides for a substantial payment to the General Fund.
As noted, MCI will pay $1 million in refunds for the period October 1, 2005-May 31, 2007, in addition to amounts it paid before that period. It will apply its credit requirements liberally to ensure that all affected consumers are compensated. Moreover, MCI will take steps to ensure such charges do not recur. It has adopted a new long distance account cancellation policy. It has stopped purchasing lists that led to many erroneous MUFs. Finally, MCI will make a substantial payment to the state's General Fund. The state will receive $1.3 million immediately, and additional payment if MCI's accounting of refunds (due no later than September 30, 2007) shows that the $1 million refund amount was not fully paid out.
For the foregoing reasons, the Commission finds that the settlement in this proceeding is reasonable in light of the whole record, is consistent with the law, and is in the public interest. The Settlement Agreement should therefore be approved.
6 Supplement at 7-8.
7 Id. at 9.
8 Decision (D.) 05-11-029.
9 Supplement at 5.
10 The "MCI Subsidiaries" are "the certificated operating companies owned by MCI in California."
11 2002 Cal. PUC LEXIS 728, at *24.
