a) Record Basis for Concluding that PU Code Section 495.7 Authorizes Detariffing of All Services

According to TURN and DRA, the Commission concluded that it has the statutory authority and sufficient evidentiary record to order detariffing of all services but basic residential rates. TURN and DRA argue that there is inadequate record support for the Commission's conclusion that section 495.7 "authorizes the Commission to eliminate tariffing of all services with the exception of basic service, as long as certain criteria are met." (TURN/DRA Rhg. App., p. 16, citing D.06-08-030, p. 277 [Conclusion of Law 36].) As TURN and DRA note, the Commission acknowledged that the basis for its consideration of detariffing is MCI's Opening Comments.²² (See D.06-08-030, p. 185.) TURN and DRA also point out that MCI ceased participating in the proceeding, and that the Commission itself recognized that the record concerning the detariffing proposal is limited. (D.06-08-030, p. 185, fn. 702.)

TURN and DRA also claim that the Decision's reliance on MCI's comments is further undermined by the substance of those comments, as MCI itself asserted that legislative change could be required for the Commission to order detariffing. (TURN/DRA Rhg. App., p. 17, fn. 39, citing MCI Opening Comments, p. 15, fn. 10.) According to TURN and DRA, since MCI itself stated that legislation might be necessary to effectuate detariffing, the Commission cannot reasonably rely on MCI's showing. TURN and DRA also point out that no other party proposed detariffing during the evidentiary phase of the proceeding.

We find that TURN and DRA's arguments lack merit for several reasons. First, we did not adopt MCI's proposal in this phase of the proceeding. (See D.06-08-030, pp. 185-86; p. 269 [Findings of Fact 84, 85]; p. 281 [Ordering Paragraph 10].) Instead, we stated that: "As we further review the record in this proceeding, we find that MCI's proposal to detariff telecommunications service deserves serious consideration." (D.06-08-030, p. 185.) We further noted that Public Utilities Code section 495.7 "indicates that the Commission has the ability to order detariffing of all services other than basic exchange service," and that "on first impression, it appears that §§ 495.7(e)-(h) do not impose any implementation requirements that prevent us from ordering detariffing." (D.06-08-030, p. 185.) We acknowledged that "since parties did not address the detariffing issue in their briefs, we will permit parties, in a separate briefing cycle, to address legal and implementation issues that the Commission should consider before ordering detariffing of telecommunications services....It is our intention to decide whether to order detariffing before the end of the year."²³ (D.06-08-030, p. 186 (emphasis added).)

Clearly, we did not make the determination to detariff in this Decision, nor did we make any findings pursuant to section 495.7. We merely articulated our intention to further consider the issue and allow parties the opportunity to further comment on the detariffing proposal prior to making any determination. TURN and DRA's argument, therefore, that there is little record support on whether detariffing is a good public policy is premature. We recognized in the Decision that there was limited discussion on detariffing in the parties' proposals, and allowed parties to provide further comment on "legal and implementation issues" that we should consider prior to ordering detariffing. This did not foreclose parties from discussing policy ramifications of detariffing. The parties still had the opportunity to raise any legal or factual obstacles the Commission should consider prior to ordering detariffing.

Second, the Decision's finding that section 495.7 authorizes detariffing as long as certain criteria are met (see Conclusion of Law 36) is a straightforward legal conclusion. The fact that MCI stated that further legislation may be required does not undermine the Decision's conclusion describing the authorization that section 495.7 provides.

Third, contrary to TURN and DRA's allegations, we find that there is record evidence to support the underlying policy consideration of including detariffing as an element to URF. For example, MCI's proposal recommending the elimination of tariffing requirements included discussion from a policy perspective:

Traditional wireline carriers should not be required to create and file tariffs that describe the terms and conditions of their services. [Footnote omitted.] Rather, provider-customer relationships should be governed by contracts as they are in all other areas of commerce. Tariffs are an example of practices that were used in the monopoly telephone marketplace that have outlived their usefulness. It is doubtful that customers today read and rely on tariffs to choose between service providers and set their service expectations. Non-traditional and intermodal providers that compete with traditional wireline carriers are not subject to tariffing requirements. Consistent with "Real Deregulation" and the goal of "uniform" regulation, these requirements should be eliminated for wireline carriers. Where the marketplace and consumer choice have been functioning more freely, tariffing is not practiced. Rather, wireless telecommunications, cable and internet access service providers enter into contracts with their customers. Instead of continuing to impose the burdensome tariffing process only on wireline carriers, the Commission should allow wireline competitors to transition to the contract practices used by their non-traditional competitors to dictate the terms and conditions of service. In addition, to the extent tariff notice requirements have been criticized on competitive grounds, since they signal to competitors one firm's marketing and pricing plans, removal of this legacy requirement will overcome that objection.

(MCI Opening Comments (filed May 31, 2005), pp. 15-16.) In its Reply Comments, MCI reiterated its recommendation that the Commission eliminate tariffing requirements, emphasizing that tariffing requirements are no longer necessary in today's competitive marketplace and that non-traditional and intermodal providers that compete with traditional wireline carriers are not subject to such requirements. (See MCI Reply Comments (filed Sept. 2, 2005), pp. 3-6.)

In addition, Frontier's Reply Comments (filed Sept. 2, 2005), supported detariffing. Specifically, Frontier stated:

Having reviewed the various proposals regarding advice letters and tariffing requirements in the opening comments, and having considered the competitive forces at play in the current market, Frontier believes that tariffs are no longer necessary and, in particular, no reason to tariff price deregulated services. With the removal of pricing restrictions for ILEC-provided services, and the removal of constraints on promotions, bundling, grandfathering and the initiation of new services, there will no longer be a need for the Commission to approve rate modifications. Rather it should be sufficient for carriers to provide notice of rate changes to customers and to the Commission, and to maintain a schedule of rates, terms and conditions on their web sites. This is the approach that the FCC has adopted for interexchange carriers, and in a non-price regulated environment, it should be equally applicable to other carriers, including ILECs.

(Reply Comments of Citizens Telecommunications Co. of Calif., Inc. (filed Sept. 2, 2005), p. 25.)

Moreover, contrary to TURN and DRA's claim that no party had the opportunity to comment on whether detariffing was a good idea, TURN, in the reply declaration of Dr. Roycroft, specifically opposed MCI's recommendation to eliminate tariffing, claiming that market conditions did not support it:

MCI's ultimate recommendation for the Commission is to institute "Real Deregulation." This would include elimination of all regulation regarding "certification, tariffing, quality of service, reporting and retail prices, when such regulation is not required of non-traditional providers." [Footnote omitted.] Market evidence simply does not support such a proposition. Adoption of such an approach would unleash firms which have substantial monopoly power, leading to outcomes which MCI itself recently warned of in the special access market [footnote omitted]....Thus, MCI's Comments in this proceeding ignore economic facts and market evidence which MCI considered vital a few months ago. MCI's advocacy of "Real Deregulation" in the face of the substantial evidence of monopoly power in the Respondent ILECs' service areas should be rejected.

(Roycroft Reply Decl. filed on behalf of TURN (filed Sept. 2, 2005), pp. 87-88.)

In light of the above discussion, there is no merit to TURN and DRA's claim that there was an inadequate record to support our determination to further consider the detariffing proposal, and our conclusion that "section 495.7 authorizes the Commission to eliminate tariffing for all services, with the exception of basic service, as long as certain criteria are met."

²² TURN/DRA claim that Verizon's counsel stated off the record at the September 20-22, 2005, workshop that he would withdraw MCI's comments from the record, and therefore TURN/DRA argue that parties had a reasonable basis to conclude that MCI's comments would no longer be part of the record. However, there is nothing in the record to support this contention, and the fact remains that MCI's Comments were not withdrawn, no party filed a motion to strike MCI's Comments or testimony, and the Comments remained part of the record. Even if Verizon's counsel did state he would withdraw MCI's comments, this conversation would have taken place after parties had filed Reply Comments on the proposals on September 2, 2005.

²³ Opening and Reply Comments on detariffing have been filed in Phase II, but the Commission has not yet issued a proposed decision on the detariffing issue.