Decision 06-12-044 December 14, 2006
Before The Public Utilities Commission Of The State Of California
Order Instituting Rulemaking on the Commission's Own Motion to Assess and Revise the Regulation of Telecommunications Utilities. |
Rulemaking 05-04-005 |
ORDER MODIFYING AND GRANTING LIMITED REHEARING OF DECISION (D.) 06-08-030, AND DENYING REHEARING OF DECISION, AS MODIFIED, IN ALL OTHER RESPECTS
I. INTRODUCTION
On August 30, 2006, we issued Decision (D.) 06-08-030 (Decision) in Order Instituting Rulemaking (R.) 05-04-005 (OIR).1 We instituted the rulemaking to assess and revise the rate regulation of large and mid-sized incumbent local exchange carriers (ILECs) in California. (D.06-08-030, p. 13.) The primary purpose of the proceeding was to develop a "uniform regulatory framework" (URF) to the extent that such a framework would be feasible and in the public interest. (D.06-08-030, p. 13; R.05-04-005, pp. 2-3.) The OIR listed, described, and appended, along with the elements of a hypothetical Uniform Regulatory Framework (URF), specific issues to be considered within the proceeding.2
Parties to the proceeding filed comments pursuant to the OIR in 2005. On May 31, 2005, sixteen parties filed opening comments in the rulemaking.3 The two largest ILECs, AT&T4 and Verizon California, filed newly proposed "frameworks;" the Division of Ratepayer Advocates (DRA) and The Utility Reform Network (TURN) assessed and proposed specific changes to the existing framework; and Frontier and SureWest proposed frameworks similar to the one set forth in the OIR's Appendix A, Issue 10. The other parties' comments offered more limited evaluations and suggestions. On September 2, 2005, twelve parties filed reply comments.5
Two workshops were held during this phase of the URF proceeding. A June 3, 2005, workshop addressed procedural issues. In addition to addressing scheduling and other procedural matters, parties requested a more definite scoping memo. (See D.06-08-030, p. 13.) On June 8, several parties submitted statements in which they put forth specific questions concerning the scope of the proceeding for the Commission to address.6 On May 13, 2005, several parties also filed a Joint Motion for Change of Schedule.7 The motion noted "the lack of clarity in the OIR" and asked for further clarification as to the scope of the proceeding. (D.06-08-030, p. 8.) A Final Scoping Memo addressing the scoping ambiguities identified by the parties was issued August 4, 2005.
A second workshop was held from September 20-22, 2005, which included presentations of the parties' proposals. The parties' presentations are summarized in the Decision at pages 15-21.
On December 16, 2005, the Commission President, the Assigned Commissioner, and ALJ issued a joint ruling setting three days of evidentiary hearings for the end of January 2006. The purpose of the evidentiary hearings was to allow the parties an opportunity to go beyond their workshop discussion regarding the existing level of competition in the statewide voice communications market. (See D.06-08-030, p. 26.) Evidentiary hearings took place from January 30 through February 2, 2006.8 AT&T, Verizon, SureWest, Frontier, DRA, TURN, and DOD/FEA presented witnesses for cross-examination, and most of the active parties in the proceeding participated in the evidentiary hearings.9 (D.06-08-030, pp. 26-27.)
Parties filed briefs on the proceeding in 2006. On March 6, 2006, thirteen parties submitted opening briefs on topics addressed in this phase of the proceeding, including the issue of the level of competition.10 On March 24, 2006, eleven parties filed reply briefs.11
In D.06-08-030, we evaluated statutory guidance and market conditions in order to determine whether competitive forces may be more heavily relied on to produce "just and reasonable" rates for California's telephone consumers. We granted carriers broad pricing freedoms concerning almost all telecommunications services, new telecommunications products, bundles of services, promotion, and contracts. However, we found that continued pricing regulation was warranted in a few specific circumstances relating to public policy programs, such as the California LifeLine program and California High Cost Fund-B subsidies. We also reduced or eliminated many rate-of-return regulations, such as "accounting adjustments" and other rules that might cause regulatory accounts to diverge from financial accounts, and instead based requirements on Generally Accepted Accounting Principles (GAAP) accounting standards and Federal Communications Commission (FCC) accounting rules.
On September 29, 2006, TURN and DRA filed a Joint Application for Rehearing of D.06-08-030. Disability Rights Advocates (DisabRA) also filed an Application for Rehearing on September 29, 2006. TURN and DRA raise the following allegations of legal error in their rehearing application: (1) the Decision's elimination of the geographic averaging requirement violates Commission Rules and Due Process in that the Commission failed to provide proper notice and opportunity to be heard, is unsupported by the record, and is contrary to the Telecommunications Act of 1996 and Public Utilities Code sections 739.3(c),12 495.7, and 454; (2) the determination to detariff all telecommunications services is unsupported by the record and contrary to section 495.7; (3) the Commission acted contrary to section 1708 by failing to notice its intent to alter its decisions in the AT&T and Verizon merger proceedings regarding what constitutes the relevant markets; (4) the elimination of NRF-specific monitoring reports conflicts with the Commission's regulatory duties as well as its stated intent to remain "vigilant" in monitoring the telecommunications marketplace; (5) the elimination of "asymmetric" marketing, disclosure, or administrative processes in Ordering Paragraph 21 is unlawfully vague, fails to provide notice and opportunity to be heard pursuant to section 1708, and constitutes unlawful delegation of the Commission's regulatory duties; (6) the Decision inconsistently caps some, but not all, rate elements for basic residential subsidized services; (7) the Decision does not protect rates for ULTS and CHCF-B subsidized service included in bundles; and (8) the Decision adopts an inconsistent revenue neutrality principle.
DisabRA concurs with the issues raised by TURN and DRA, and also raises the following allegations of legal error in its rehearing application: (1) the Decision fails to make sufficient findings of fact and conclusions on law on the issues raised by DisabRA in the proceeding, in violation of section 1705; and (2) the Decision fails to clearly refer the issues raised by DisabRA to R.06-05-028.
Three responses in opposition to the rehearing applications were filed by Verizon and MCI (jointly), Pacific Bell, and Citizens, Frontier, and Surewest (jointly). Cox Communications filed a response in support of the following issues raised in TURN and DRA's Application for Rehearing: (1) the challenge to the Decision allowing carriers to include CHCF-B subsidized services in retail bundles; (2) the findings on geographic deaveraging; (3) the plan to detariff all services other than basic exchange services; and (4) vagueness of the language in the Decision on the elimination of asymmetric regulations.
After careful review of the allegations contained in the applications for rehearing, we have decided to grant limited rehearing on the issues regarding Ordering Paragraph 21 and the elimination of asymmetric marketing, disclosure and administrative requirements, as set forth below. We also modify D.06-08-030 for purposes of clarification, as discussed below. Except as noted, rehearing of D.06-08-030 as modified, is denied.
1 Order Instituting Rulemaking For The Purpose Of Assessing And Revising The Regulation Of Telecommunications Utilities (OIR), Rulemaking (R.) 05-04-005, dated April 7, 2005.
2 See OIR 05-04-005.
3 DRA, TURN, SBC California, Verizon California, SureWest Telephone, Frontier, Cox California Telcom, LLC DBA Cox Communications (Cox); Department of Defense and all other Federal Agencies (collectively, DOD), Disability Rights Advocates (DisabRA), XO Communications (XO), Nextel of California (Nextel), California Cable and Telecommunications Association (CCTA), Pac-West Telecom (Pac-West), Level 3 Communications, MCI, Inc. and California Small Business Roundtable and California Small Business Association (collectively, CSBRT/CSBA).
4 AT&T was known as Pacific Bell Telephone Company and SBC California in prior phases of this proceeding. Company filings are referenced in accordance with the company's name as it is listed on the title page of the filing.
5 DRA, TURN, SBC California, Verizon California, SureWest, Frontier, CCTA, DOD, Time Warner Telecom of California, LP (Time Warner), Cox Communications, The Greenlining Institute (8/12/05) (Greenlining), DisabRA, and MCI.
6 Cox Communications, DRA/TURN, SBC, XO Communications, Verizon, Pac-West, Nextel, and Caltel.
7 Filed by DRA on behalf of Arrival Communications, Inc., CALTEL, California Payphone Association (CPA), Navigator Telecommunications, LLC, Pac-West, TURN, Utility Consumers Action Network (UCAN), XO Communications, and DRA.
8 An additional day was added during the hearings.
9 The participants included AT&T, Verizon, SureWest, Frontier, DRA, TURN, DisabRA, and DOD/FEA.
10 These parties included the following: DRA, TURN, SBC California, Verizon California, SureWest Telephone, Frontier, Cox Communications, CCTA, DOD, Time Warner, Greenlining, CPA, and DisabRA.
11 Neither CCTA nor CPA filed reply briefs.
12 All code section references are to the California Public Utilities Code, unless otherwise noted.
