a) Notice and Opportunity to Be Heard

In D.06-08-030, we decided to "remove the geographic averaging requirement for all services other than [California High Cost Fund-B (CHCF-B)] subsidized basic residential service." (D.06-08-030, pp. 142-43; see also p. 275 [Conclusion of Law 27], p. 280 [Ordering Paragraph 1].) TURN and DRA argue that the Commission failed to follow its own rules and did not provide proper notice to the parties that geographic deaveraging was an issue in the proceeding, as the Commission failed to include elimination of the geographic averaging requirement in the OIR or Scoping Memo.¹³ In particular, TURN and DRA argue that the Commission did not raise, and no party proposed the possibility of allowing geographically deaveraged rate increases. (TURN/DRA Rhg. App., p. 2 (emphasis in original).) Accordingly, TURN and DRA contend that parties did not have the proper opportunity to be heard on this matter, in violation of parties' due process rights.

In support of their position, TURN and DRA cite the California Court of Appeal for the Second Appellate District's recent decision in Southern California Edison Co. v. Public Utilities Com. (2006) 140 Cal.App.4^th 1085 (Edison). According to TURN and DRA, the Edison case addressed the Commission's ability to decide an issue absent from the Scoping Memo but raised in a party's comments and found that the Commission violated its own procedural rules by doing so. (TURN/DRA Rhg. App., p. 4.)

TURN and DRA point out that in the instant case, the preliminary Scoping Memo set out in the OIR in this proceeding states: "The scope of this proceeding consists of those issues identified below...Any issue not identified in this Appendix or a subsequent ruling by the assigned Commissioner is outside the scope of this proceeding." (OIR, p. A-1.) TURN and DRA argue that neither Appendix A of the OIR nor the August 4, 2005 Scoping Memo included geographic deaveraging as an issue or sub-issue. TURN and DRA further argue that, under Edison, the fact that certain parties may have raised the geographic deaveraging issue in their comments does not necessarily mean it is within the scope of the proceeding, absent affirmative indication from the Commission that it is included.

We do not agree with TURN and DRA. Although the Commission must fairly appraise interested parties of the subjects and issues under consideration in a proceeding,¹⁴ the Edison case does not stand for the proposition that the Commission can consider only an issue expressly and specifically identified in the scoping memo for a proceeding. We find that the instant OIR gave sufficient notice to the parties that the issue of geographic deaveraging could be considered in this proceeding.

The OIR provided broad notice that all pricing regulations were under consideration for revision, and that the adopted framework should be "competitively neutral" and achieve uniformity across firms. The language of the OIR demonstrates that retail pricing flexibility was the central issue in URF:

The scope of this proceeding is to review and, if appropriate, revise the Commission's regulation of telecommunications services provided to end users. The ultimate goal of this proceeding is to develop a uniform regulatory framework that applies to all providers of regulated telecommunications services, except small ILECs, to the extent that it is feasible and in the public interest to do so. [Footnote omitted.] Any regulatory framework adopted by the Commission should achieve several objectives. Most importantly, the adopted framework should ensure, to the extent practical, that every person and business in California has access to modern, affordable, and high quality telecommunications services. The adopted framework should also be competitively and technologically neutral. In addition, the adopted framework should encourage technological innovation, economic development, and employment in California. The specific issues comprising the scope of this proceeding are listed in Appendix A.

(R.05-04-005, pp. 2-3.)¹⁵ The OIR's Appendix provided further details concerning the issues under consideration. Parties were asked to submit comments addressing the following:

Is there a uniform regulatory framework that can be applied to all providers of regulated intrastate telecommunications services? If so, every element of the uniform regulatory framework should be identified and described in detail. Any party that recommends a specific framework should provide adequate information for the Commission to implement the framework.

(R.05-04-005, Appendix A, Issue 1, p. A-1.) Appendix A, Issue 10 sets out one possible uniform regulatory framework, and includes some of the following elements:

· "No price regulation except for basic local exchange services provided by the large and medium-sized ILECs to residential and business customers."

· "Use advice letter filings to revise prices for all services provided by the large and medium-sized ILECs, except basic local exchange services."

· "No limitations on promotions."

· "Refrain from price regulation of new services and new technologies."

A requirement to geographically average prices is a form of price regulation. As the OIR specifically suggested "no price regulation except for basic local exchange services," there was reasonable notice that the issue of elimination of geographic averaging was properly within the scope of this proceeding.¹⁶

TURN and DRA also argue that they requested further clarification of the Scoping Memo both in a joint Motion for Change of Schedule (filed May 13, 2005), and in its June 8, 2005 Clarification Statement. However, neither of these documents specifically mention geographic deaveraging. The August 4, 2005, Scoping Memo provided clarification of certain issues as requested by parties. As no party requested clarification on this issue, the Scoping Memo is silent on the matter. Moreover, we find that because geographic deaveraging was already within the scope of the issues to be considered in this proceeding, there was no reason to "clarify" or "add" the issue in the August 4, 2005, Scoping Memo. In addition, we note that downward geographic deaveraging was part of DRA's proposal. (See DRA Reply Comments, p. 12 (Sept. 2, 2005).) If DRA had any concern as to whether geographic deaveraging (whether upward or downward) was properly within the scope of the proceeding, it could have asked for specific clarification on that point.¹⁷

¹³ See section 1701.2(a), which provides that the "assigned commissioner or the assigned administrative law judge shall hear the case in the manner described in the scoping memo." See also, Commission Rules of Practice and Procedure, Rule 5(m) (effective March 2005, at the time of the proceeding), which defines scoping memo as "an order or ruling describing the issues to be considered in a proceeding and the timetable for resolving the proceeding."

¹⁴ See, e.g., Ass'n of Am. Railroads v. Dep't of Transp. (D.C. Cir. 1994) 38 F.3d 582, 589; United Steelworkers of America, etc. v. Schuylkill Metals Corp. (5^th Cir. 1987) 828 F.2d 314, 317-18.

¹⁵ We further noted that the rates for most services offered by small ILECs are set on cost-of-service basis, and there will be no change to the regulatory structure of small ILECs. This provides further indication that we would be considering broad changes to the rate regulation of mid-sized and large ILECs.

¹⁶ TURN and DRA raise a similar claim that the issue of detariffing was outside the scope of this proceeding. As with geographic deaveraging, we find that detariffing is sufficiently related to pricing regulation and pricing flexibility, so that the OIR provided reasonable notice that this issue could be considered by the Commission. In addition, we did not make a determination to detariff in the Decision. Rather, we provided parties an additional round of comments in Phase II of the proceeding on the legal and implementation issues we should consider before ordering detariffing of telecommunications services. (See D.06-08-030, pp. 185-186; p. 269 [Findings of Fact 84, 85]; p. 281 [Ordering Paragraph 10].) Therefore, parties will have received more than adequate notice and an opportunity to be heard on the detariffing issue prior to a Commission determination on the matter.

¹⁷ TURN/DRA seem to make a distinction on the notice issue between upward and downward deaveraging, arguing that there was specifically no notice about upward deaveraging because no party proposed upward deaveraging. However, TURN/DRA proposed downward geographic deaveraging as part of their proposal, and noted that Cox Communications proposed no change to geographic averaging in its proposal. TURN/DRA fail to explain why its downward geographic deaveraging component would fall within the scope of the proceeding, while upward geographic deaveraging would not.