II. Background
Pursuant to California Public Utilities Code Article 8,1 LifeLine provides discounted residential wireline telephone service to eligible low-income Californians.2 Currently, carriers provide the discounted service to nearly 3.5 million Californians at a cost of $304.5 million annually in federal funds, and $251.35 million annually in state LifeLine funds.
In D.05-04-026, the Commission took the initial steps necessary to ensure that the state would continue to receive the annual federal Lifeline/Link-Up funds to protect the financial viability of the Universal Lifeline Telephone Service (ULTS) or California LifeLine program. Specifically, that decision adopted a program of initial income certification and annual verification, as required by the Federal Communications Commission's (FCC) Lifeline Order.3
The certification process is for new LifeLine customers; it requires potential new customers to provide proof of program eligibility by providing income documentation or by self-certifying participation in one of several approved assistance programs. The verification process occurs annually for existing LifeLine customers; this process requires current LifeLine customers to self-certify annually as to their continued eligibility on either an income basis or via participation in a recognized assistance program. The verification process requires customers to complete and return LifeLine forms to the certifying agent, self-certifying their eligibility.
In D.05-12-013 and in Resolution T-16996, the Commission adopted revisions to GO 153 necessary to implement changes to the LifeLine program. The Telecommunications Division4 issued a Request for Proposal (RFP) and entered into a contract with Solix, Inc. (Solix) to serve as third-party certifying agent (CertA) for the certification and verification process. The Commission implemented the new certification/verification process on July 1, 2006.
The annual verification process calls for verifying the continued eligibility of the approximately 3.5 million customers currently enrolled in the LifeLine program. Shortly after implementing the new program, Commission staff found that the customer response to the LifeLine verification notice was extremely low: in August 2006, 29% returned the verification notice; by the end of September, the percentage was only 49%. According to the telephone carriers that previously administered the LifeLine process prior to the federal changes, they experienced response rates of over 70%.5
Under the Commission's new process, those customers who did not respond to the verification notice were sent a letter informing them that they were being removed from the LifeLine program and would be required to pay regular telephone rates. Those who received the denial letters could appeal the denial to the Consumer Affairs Branch (CAB) at the Commission. Since adoption of the new LifeLine verification system, customer phone calls and complaints to CAB and the carriers have increased significantly. By October 2006, CAB was receiving 300-500 letters per day from customers appealing their elimination from the LifeLine program.
On November 1, 2006 Commissioner Dian M. Grueneich issued an Assigned Commissioner's Ruling (ACR or November ACR), temporarily suspending portions of GO 153 relating to the annual LifeLine verification process. The suspension, which was instituted for a period not to exceed six months, has provided Commission staff an opportunity to identify the reasons for the low response rate and take steps to solve the problems.
The November ACR also ordered Commission staff to hold a workshop including telephone carriers, Solix, and other interested parties to discuss solutions to the verification form response rate problem. The Commission ratified the November ACR in D.06-11-017 on November 9, 2006.
In compliance with D.06-11-017, staff convened workshops on November 13-14, 2006. Problems associated with the verification process were identified and two working groups, the Implementation Working Group and the Marketing Working Group, were established. The Implementation Working Group initially met on a weekly basis, and now meets on a bi-weekly basis to discuss and find solutions to the low response rate for the verification process, while the Marketing Working Group meets regularly to develop marketing strategies and improve customer recognition of California LifeLine changes.
The above discussion has focused on the LifeLine verification process. Towards the end of 2006 it became clear that there was a growing problem with the certification process. Currently, the percentage of certification forms returned is about 46%, compared to 49% for verification forms.6
One contributing factor to the low certification response rate appears to have been problems with the carrier-customer interaction when new LifeLine customers are signed up. Between January 29, 2007 and the end of February 2007, CAB staff conducted approximately 50 calls to Verizon California Inc. (Verizon) and Pacific Bell Telephone Company d/b/a AT&T California (AT&T) call centers to determine whether customers receive correct and complete information regarding the California LifeLine program. In nearly half of the calls, the AT&T and Verizon representatives provided incomplete or inaccurate information on the program. GO 153 requires carriers to provide information on the LifeLine program to customers. The Consumer Protection Services Division has initiated an investigation into the practices of the AT&T and Verizon call centers to determine whether both carriers are complying with GO 153.
Further, AT&T's customers who applied for the LifeLine discount but were rejected were being charged a conversion/regrade charge when they were placed back into a non-LifeLine residential service rate. This does not comply with GO 153 § 5.4.4. On February 28, 2007, Commissioner Grueneich issued a second ACR directing AT&T and Verizon to comply immediately with GO 153 and
D.06-11-017 and set follow-up actions. The February ACR requires carriers to hold customers harmless from the imposition of all charges that would otherwise not accrue pursuant to the certification process of GO Section 5.4.4, and directs carriers to charge customers only those charges specified in the GO, which are as follows: previously waived or discounted charges, service initiation charges, end user common line charges, taxes, and surcharges associated with LifeLine discounts.
On March 2, 2007, AT&T filed a motion for clarification of certain aspects of the February ACR. On March 26, 2007, AT&T made a further filing, saying that in its March 2, 2007 motion, AT&T had argued based on the language of GO 153 § 5.4.4 and its tariffs, that the LifeLine certification process authorized a conversion charge for those customers who fail the certification process. Based on conversations with Commission staff and further review, AT&T concluded that the arguments advanced in those pages of the motion were in error, and AT&T withdrew them.
On March 28, 2007, Commission Grueneich issued a third ACR (March ACR), clarifying that D.06-07-017 suspended only the verification process, not the certification process. The March ACR also clarifies paragraphs seven and eight of the February ACR and directs AT&T to comply immediately with paragraphs seven and eight of the February ACR, as clarified. Although AT&T withdrew its argument that the LifeLine certification process authorized a conversion charge for those customers who fail the certification process, the March ACR clarified that GO 153 Section 5.4.4 does not allow for such a conversion charge. The March ACR notes that D.05-12-0137 expressly prohibits such charges for new LifeLine customers who fail to qualify for the program.
The Proposed Decision (PD) was issued on April 3, 2007. Seven parties filed comments on the PD.8
1 Article 8 of the Public Utilities Code, also known as the Moore Universal Telephone Service Act, requires the Commission to implement lifeline telephone service to meet minimum residential communications needs. Minimum residential communications needs include, but are not limited to, the ability to originate and receive calls and the ability to access electronic information services.
2 The Commission reviews and adopts annual income limits for the LifeLine Program.
3 Lifeline and Link-Up Report and Order and Further Notice of Proposed Rulemaking, WC Docket No. 03-109, FCC 04-87 (rel. April 29, 2004).
4 The Telecommunications Division is now known as the Communications Division.
5 The carrier response rates are not strictly comparable to current response rates since the program was administered differently at that time and only required that customers self-certify their income eligibility.
6 Report on Strategies to Improve the California LifeLine Certification and Verification Process, California Public Utilities Commission, April 2, 2007, p. 41 (the Attachment to this decision). The data include actual results July 1, 2006 through February 2007.
7 D.05-12-013 approved modifications to GO 153.
8 The parties that filed comments include: AT&T; Cox California Telcom, LLC d.b.a. Cox Communications (Cox); The Greenling Institute (Greenlining); Calaveras Telephone Company, Cal-Ore Telephone Co., Ducor Telephone Company, Foresthill Telephone Co., Global Valley Networks, Inc., Happy Valley Telephone Company, Hornitos Telephone Company, Kerman Telephone Co., Pinnacles Telephone Co, The Ponderosa Telephone Co., Sierra Telephone Company, Inc., The Siskiyou Telephone Company, Volcano Telephone Company, and Winterhaven Telephone Company (Small LECs); SureWest Telephone and SureWest TeleVideo (SureWest); The Utility Reform Network, The National Consumer Law Center, Disability Rights Advocates and the Latino Issues Forum (Joint Consumers); and Verizon.
